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French Version

Global outlook is brighter, says OECD

The outlook for the global economy is improving, although concerns are emerging about prospects for the United States and the eurozone, the Organization for Economic Cooperation and Development said.

The Bank of Japan also delivered an upbeat economic assessment, saying Japan is showing signs of shrugging off its long-running recession.

The OECD said its “early warning” indicator, which looks at the world’s top 30 economies, was moving forward and that “continued expansion lies ahead in the OECD area.”

The Paris-based think tank warned, however, that “February data signal slightly weakening performance in the United States and the euro area, particularly in Germany.” The OECD’s concerns about Germany were published as the Berlin government denied a report that the chancellor, Gerhard Schröder, is planning to sack finance minister Hans Eichel within the next few months.

Der Spiegel newspaper said Mr Eichel would be replaced by a bank executive, Ingrid Mathaeus-Maier. “We deny this,” said a spokesman for the government. In Tokyo, the Bank of Japan said the economic recovery was now being helped by a pick-up in domestic demand, which had been depressed—in part because price deflation had caused consumers to delay making purchases until goods became cheaper.

The economy’s recovery was seen as dependent on the performance of Japan’s car, electronics and machinery exporters. The Bank of Japan (BoJ) has spent massive amounts on the foreign exchanges in recent months in order to prevent an appreciation of its currency against the dollar harming the export trade.

The BoJ suggested, however, that a move was beginning towards a broader-based recovery. “Japan’s economy continues to recover gradually, and domestic demand is becoming firmer,” it said. The country has not yet shaken off deflation, with the central bank forecasting that consumer prices will continue to fall slightly on a year-on-year basis. Business sentiment continued to improve, the BoJ said, with confidence beginning to spread beyond the export sector. “Although firms are continuing to restrain labor costs, increases in production and corporate profits are expected to have positive effects on employment and income conditions.”

Unemployment is around the 5 percent level measured against historical Japanese standards. Despite the improving outlook for the economy, the Japanese stock market—which had been at its highest for almost three years earlier in the week—fell 1.57 percent.

Dealers said sentiment was overshadowed by worries about the fate of the three civilians being held hostage in Iraq. Airline and travel companies were among the hardest hit, on fears that security concerns would see a decline in demand for their services.

The BoJ said it was monitoring any effect on the economy the hostage crisis might produce. “We agreed to closely and calmly watch any impact on the markets and on the real economy in the future,” bank governor Toshihiko Fukui told a news conference. “The [kidnapping] made investors very nervous,” said Yasuo Ueki, a market analyst at consultancy Poko Financial Office. “Market players are now looking at how public opinion will shape up... and, if the government mishandles the issue, that could bring down the Koizumi cabinet.”

Mark Milner
The Star

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