Japan's Government Says Country Will Have to Accept Slower Growth in Near Term
DALTON TANONAKA, CNN ANCHOR: Japan's government says the country will have to accept slower growth in the near term to give its structural reforms time to work. A report outlining the government's reform plans says Japanese economic growth will fall far short of its official forecast of 1.7 percent. And that estimate was further undermined by indicators showing the Japanese economy may be continuing to shrink in the current quarter after a contraction in q-one. The All-Industries Index of business activity fell 2 1/2 percent in April from the previous month. That's the biggest monthly drop since April 1997. The Nihon Kezai newspaper is reporting that economics minister Heizo Takenaka expects 100,000 to 200,000 job losses as Japanese banks write-off bad debts. To ease the pain, the government is proposing banks sell those loans to a state-backed company. But Takenaka told me in Tokyo recently that privatization of the government sector is at the top of the structural reform agenda.</s>HEIZO TAKENAKA, JAPANESE ECONOMICS MINISTER: The Bank of Japan and some other financial corporations, these should be some of them, not all maybe, but some of them should be privatized. By doing that, the private sector has new business possibility and chance, and also, this will revitalize the market economy itself.</s>TANONAKA: So the government is taking steps to privatize? You are seeing -- putting things in place to privatize?</s>TAKENAKA: Yes, the specific industry, especially the agency now, seriously considering this privatization plan is my understanding. So privatization is a very visible change for the people I think. Investors cheered the government proposal, Tokyo's Nikkei surging 2.2 percent. Banking giants Mizuho, FJ and Sumitomo-Mitsui all packed on more than 10 percent gains.</s>TANONAKA: With analysis of the government's moves, we're joined now by Darrel Whitten, head of research at ABN Amro Securities in Tokyo. Darrel, are you convinced that the Koizumi reforms are the way out of the last 11 years?</s>DARREL WHITTEN, ABN AMRO SECURITES JAPAN: You are serious about it and the plan is certainly comprehensive. The question that remains is how are we going to stimulate demand amidst some pretty serious deflation over the past couple of years.</s>TANONAKA: Are you optimistic at all that Takenaka and his policy council will be given the authority to make it work?</s>WHITTEN: That comes with the upper house elections on July 29th, and going forward from there, we expect him to so solidify the mandates that we've got so far.</s>TANONAKA: Well, with the popularity rating of Koizumi, what, 85 percent -- I think I saw the last one -- doesn't that seem to indicate they're going to win the elections next month?</s>WHITTEN: Well, don't forget that we also have yet another LDP presidential election in September, and I find it hard to believe that the Hashimoto faction will just kind of lay quiet during all of this. So at some point, there is going to be an attempt to gain some ground back.</s>TANONAKA: Darrel, do you see any way the economy can recover before the two to three years that the government is saying it will take?</s>WHITTEN: Not unless this whole process takes place a lot quicker than what they are indicating right now. And what that would indicate is that for the first year for example, the dip in the economy is a lot deeper than they're suggest right now.</s>TANONAKA: OK, Darrel Whitten, ABN Amro Securities in Tokyo, thank you very much. END TO ORDER VIDEOTAPES AND TRANSCRIPTS OF CNN INTERNATIONAL PROGRAMMING, PLEASE CALL 800-CNN-NEWS OR USE THE SECURE ONLINE ORDER FROM LOCATED AT www.fdch.com