Japan's motor may be running

PUBLISHED : Wednesday, 02 June, 1993, 12:00am
UPDATED : Wednesday, 02 June, 1993, 12:00am

THE power of the Japanese stock market - which has risen 24 per cent this year - has been attributed by some to artificial stimuli. Once removed, it was argued, the true nature of the recession would be reflected in rapid back-tracking by the Nikkei 225.

Now it looks as if the Japanese Government can stop turning the starting handle - the motor may be running.

The 13.2 trillion yen (about HK$951 billion) injected into the economy in April, which was not expected to show any returns until at least the middle of the summer, may prove to have been the last boost that the economy required.

The leading index of economic indicators has now been revised upwards for January and February, and while the March figure, released yesterday, indicated that the economy was still bouncing along the bottom, that, too, may be revised upwards.

The size of the revisions to the preliminary figures is beginning to look significant.

The February result was the most encouraging since June 1990, and if the March out-turn requires upwards revision, then it will be strong evidence that the worst is over in Japan.

Which doesn't mean that the good times are back again. The corporate sector has still to restructure, and learn to live with the ever more powerful yen.

The fundamental shift from redundant assets into performing investments has a long way to go, and labour costs are still out of line with the relatively low production levels.

The most positive elements of the leading indicators are a rise in orders for machinery, an increase in housing starts, and an upturn in shipments of durable goods.

What could keep the strength in the Nikkei is that March was the second month with a positive outlook for profits.