ECONOMISTS SEE SLUGGISH JAPANESE ECONOMY AHEAD

  The Japanese economy will remain sluggish
  in the months ahead after turning in its worst performance for
  12 years in 1986, private economists said.
      Consumer spending, a main driving force of domestic demand,
  was likely to remain lacklustre although brisk housing and
  business investment would help sustain the economy this year,
  the economists said.
      They said they were shocked by an Economic Planning Agency
  report today that private spending fell 0.7 pct in the Oct/Dec
  quarter for the first time in 12 years.
      The report said Japan's gross national product rose a real
  0.8 pct in Oct/Dec after a revised 0.7 pct increase in the
  previous quarter.
      It said GNP growth for 1986 was a real 2.5 pct, down from
  4.7 pct in 1985. Agency officials said this was the worst
  performance since 1974 when GNP contracted 1.4 pct in the wake
  of the first oil crisis.
      They expressed concern about the 0.7 pct decline in
  consumer spending in the final quarter of 1986 but said it was
  only temporary as exceptionally warm winter weather had
  depressed retail sales.
      But most private economists disagreed and said consumers
  were likely to remain pessimistic in coming months as they saw
  their real income level off.
      "Sure, consumers may have spent less on winter clothes or
  heating apparatus because of the warm winter this year, but
  they have done so because they have become even more uneasy
  about their future pay rises," said Shoji Saito, general manager
  of Mitsui Bank's economic research division.
      He said the outlook for pay increases was gloomy because of
   falling employment in many industries, particularly those hit
  hard by the yen's rise.
      Masao Suzaki, senior economist at the Bank of Tokyo, said
  weakened consumer confidence was the most worrying factor.
  Without brisk consumer spending, Japan can hardly achieve
  domestically generated economic growth as the government has
  put a lid on fiscal measures, he said.
      Other economists said the 0.8 pct growth registered in
  Oct/Dec may have been inflated by special factors, including
  exceptionally heavy spending in the public sector. Johsen
  Takahashi, chief economist at Mitsubishi Research Institute,
  said the 14.4 pct increase in public sector spending in Oct/Dec
  resulted from an issue of gold coins.
      "This is just a one-shot spending and we can't expect that
  high level of public-sector consumption in the following
  quarter," Takahashi said. Agency officials said public spending
  would have risen 1.1 pct in Oct/Dec without the issue, which
  marked 60 years of Emperor Hirohito's reign.
      Takahashi said the economy might contract in the current
  quarter given the lack of additional significant government
  spending and sluggish consumer spending.
      Saito said the most effective government action would be
  income tax cuts and the postponement beyond next January of a
  proposed controversial sales tax.
  

