TOKYO -- An important government survey released yesterday showed that the Japanese economy, struggling to emerge from a bruising two-year-old recession, is still deteriorating and may not recover for a year or more.
The quarterly survey of thousands of companies by the Bank of (( Japan, known as the tankan, showed a steep decline in business executives' expectations for the future and indicated that they were planning to cut staff and reduce spending.
"The survey confirmed the stagnant economy with no signs for a recovery," conceded Kagehide Kaku, director of research at the Bank of Japan. "Chances have become higher for a recovery in the next fiscal year, while chances of one in the second half of the current fiscal year have decreased."
The survey provided one part of a complex picture of the economy painted by recent statistics. The government also released a report yesterday showing that the economy grew five-tenths of 1 percent in the July to September quarter, slightly stronger than expected, reflecting a modest rise in consumer spending.
Given the pall generally hanging over the economy, Robert Alan Feldman, economist with Salomon Bros. Asia, said the numbers appeared to give a slightly misleading picture. A recent adjustment in the system by which the figures are calculated, he said, may have overstated growth.
"The numbers were somewhat surrealistic, but all in all it was not a wholly gloomy picture," Mr. Feldman said. "It suggests that at least in some areas government policy is working."
Nonetheless, Mr. Feldman, like other private economists, predicted the economy would shrink this year and would post anemic growth next year. That, he added, increased the chances that the Bank of Japan would reduce interest rates again; the discount rate is already at a record low of 1.75 percent.
The survey was bad news for the government of Prime Minister Morihiro Hosokawa, which has been struggling for weeks to come up with a credible economic plan.
His Cabinet has basically decided to defer announcing a new economic package until later this month at the earliest. It would become the fourth emergency package put together by the government in the last 18 months.