JAPAN ECONOMY MAY BE NEAR BOTTOM, ECONOMISTS SAY

  The worst may be just about over for
  Japan's battered economy but economists said they do not expect
  a vigorous recovery anytime soon. Japanese bank economists
  polled by Reuters said the economy's 18 month-old slowdown is
  likely to end in the first half of this year, helped by rising
  exports, stepped-up government spending and falling prices. "The
  economy will bottom out in the middle of the year," said
  Sumitomo Bank Ltd chief economist, Masahiko Koido.
      Industrial Bank of Japan Ltd senior economist Susumu
  Taketomi agreed. "It (the bottom) is in the offing," he said.
      But he added that the recovery will be slow. Growth in the
  fiscal year beginning next month will only pick-up 2.2 pct,
  from two pct in the current year, he said.
      Signs that the economy has just about weathered the worst
  are increasing.
      The volume of exports in the first two months of the year
  rose slightly on a year-on-year basis, after declining toward
  the end of last year.
      Although this may be due to extraordinary factors such as a
  sharp rise in car exports to rebuild depleted European stocks,
  several economists said it could mark the beginning of a
  recovery.
      Industrial production fell 0.7 pct in January, much smaller
  than expected, and is forecast by the government to rise 0.3
  pct in February and 2.6 pct in March. A Bank of Japan survey
  released last week showed that the decline in Japanese
  corporate earnings may be nearing its end.
      And the Paris currency accord last month has fostered hopes
  the rapid yen rise has come to the end, they said.
      Six nations - the U.K., Canada, France, Japan, the U.S. And
  West Germany - pledged in Paris last month to stabilise
  currencies around current levels.
      The yen's 40 pct climb against the dollar over the last two
  years has hit the export-driven economy hard, by forcing its
  companies to raise prices and lose sales in the U.S. Market.
      "The important thing is the exchange rate," Taketomi said.
      If it stabilises firms will grow more confident and raise
  investment in plant and equipment, although there are no signs
  of that yet, economists said.
      A stable yen would also help exporters regain some of their
  competitive edge just as the U.S economy may be starting to
  recover, economists said.
      Domestically, the economy may get a boost from some
  loosening of the government's tight fiscal policy said Haruo
  Muto, manager of national economics at the Bank of Tokyo Ltd.
      The next reading of the economy's health should come early
  next week with the release of gnp figures for the last quarter,
  1986.
      Most private economists expect a rise of about 0.5 pct from
  the previous quarter. In the third quarter, GNP rose 0.6 pct.
      But a senior government official said the fourth quarter
  figures could surprise by showing a rise of more than one point
  quarter-on-quarter. But he added that would be a statistical
  aberration and not a significant shift in economic activity.
      To maintain year-on-year growth of around 2.5 pct, the
  economy would have had to rise about 1.2 pct in the fourth
  quarter as the final quarter of 1985 was strong.
       The rise in the fourth quarter of 1985 was probably a
  statistical anomaly that was repeated in the final months of
  1986, the official said.
      Economists said the fourth quarter figures were also
  distorted by the government's sale of gold coins in the second
  half of 1986.
      Because the coins were classified as legal tender, their
  purchase did not show up in the statistics on consumer
  expenditure. Consumer spending also tailed off in December
  because of bad weather and smaller-than-normal end-year
  bonuses, they said.
      As the government had to buy back some of the coins from
  retailers because they were unsold, the government's
  contribution to the economy in the fourth quarter may have been
  boosted, economists said.
      Taketomi said it may have received a further boost from
  government buying of farm products as the domestic crop last
  year was good.
      The senior government official said the fourth quarter
  performance of the domestic sector was probably worse than
  generally expected, while that of the external sector was
  better.
  

