Japan faces lengthier recession
By Staff -- Purchasing, 7/15/1999
Despite two years of a shrinking economy, the worst of Japan's recession isn't over, says Flemming Larsen, deputy director for research at the International Monetary Fund. He believes Japan must continue with massive stimulus spending until its economy recovers, which could take years. "It is important to maintain adequate stimulus for several years until the recovery becomes sustainable," says Larsen. However, since over-reliance on government spending also can be a bad thing, Larsen says Japan "needs to strike a delicate balance between adequate government stimulus but not so much that it crowds out the private sector." The IMF recently cut its forecast for Japan's gross domestic product, predicting it will shrink 1.4% this year. It had previously predicted a contraction of 0.5%.
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