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September 10, 2010    

Strong yen poses threat to Japanese recovery

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by Kay Murchie
Strong yen poses threat to Japanese recovery

The Japanese Government has today said it believes its economy expanded more than originally thought in the April to June quarter.

It believes the economy grew by an annualised 1.5% in the three-month period - much higher than the first official estimate of 0.4%.

Cabinet Office Parliamentary Secretary, Keisuke Tsumura, said Japan’s economy was “continuing to pick up” in the second quarter.

Japan was one of the first major economies to emerge from recession – in the second quarter of 2009 – boosted by exports.

However, growth has slowed this year and the economic recovery continues to be at risk due to a strong yen and deflation.

The stronger yen has meant demand for exports has weakened, while deflation can be a serious threat to an economy because it deters consumers and businesses from spending in expectation of falling prices.

In addition, the Japanese Government is focusing on reducing the economy’s debt, which at nearly 230% of GDP is the highest of any industrialised nation.

Japan’s Prime Minister, Naoto Kan, has previously warned of tough measures in order to reduce the debt mountain – or risk a Greece-style debt crisis.

Meanwhile, a cabinet office official said today: “We need to continuously watch a strong yen and slowing foreign economies as downward factors.”

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