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Japan Outlook: Best In Years

The economic outlook for Japan in 2006 is the best in years, despite concerns of a "new real estate bubble," Standard and Poor's said Feb. 6. The ratings agency said there was a "diminishing sense of crisis" in Japan, with economic players increasingly confident about the economy and the public sector on the road to reform. It said its outlook was "the most optimistic in recent years, although some emerging problems could slow or derail the economic recovery."

The central Bank of Japan is widely expected in April to end its five-year "quantitative easing" policy by which it floods the system with cash in hopes of stimulating the economy. The S & P report said the most significant effect of rising interest rates would be on the public sector, as the outstanding balance of government bonds and borrowing stood at a staggering 888 trillion yen (US$7.47 trillion) in December.

But the public sector is also showing a "palpable sense of relief" believing that Japan "is now on a stable reform track under the administration of Prime Minister Junichiro Koizumi," according to the report. The premier won an election landslide in September. However, Koizumi is set to step down this September and Standard and Poor's warned that "it remains to be seen if these reform policies will survive into the next administration."

Copyright Agence France-Presse, 2006

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