Morgan Stanley Cuts Japan Growth Forecast on U.S. Spillover
Morgan Stanley cut its economic growth forecast for Japan, saying weakening exports will erode profits and force manufacturers to rein in production.
Japan “could see a deepening recession in October-December and January-March as exports lose further steam,'' Takehiro Sato, Morgan Stanley's Tokyo-based chief Japan economist, wrote in a report published yesterday. “Profit drops of even 20 to 30 percent would not be all that surprising.''
The U.S., which has so far managed to skirt a recession, will slow further next year, as the benefits of tax rebates wear off and banks clamp down on lending, Sato wrote. The spillover from the U.S. slowdown, coupled with higher energy costs, will also weigh on Asia, he said. Japan's exporters make more than half of their overseas sales in Asia payday loans.
Japan will grow 1 percent in 2008, slower than the 1.5 percent predicted in June, Sato said. The world's second-largest economy will fare even worse in 2009, expanding just 0.2 percent, compared with a previous forecast of 0.9 percent.
Should a U.S. recession “stifle Japan's growth'' the Bank of Japan may have to lower its benchmark interest rate from 0.5 percent in the second quarter of 2009, according to Sato.
Japan's economy probably shrank at an annual 2.3 percent rate in the second quarter, economists estimate a report to show on Aug. 13. That would be the first contraction in a year.
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