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Japan fears U.S. Economic Slowdown

November 26, 1999

TOKYO (AP) _ A U.S. economic downturn could wreck Asia’s economic rebound, and the region must wean itself off exports to America to ensure a stable recovery, the government said in a report released Friday.

Many Asian economies, including Japan, have slowly been emerging from their worst recession in decades, and the upswing has largely been fueled by robust U.S. demand for their goods.

But America won’t be able to continue its level of imports of Asian products forever, Japan’s Economic Planning Agency warned in its annual report on the world economy.

The EPA said that U.S. stocks have recently been overvalued by as much as 55 percent. Many of factors behind U.S. economic growth, such as low inflation and rising labor productivity, have started to fade, it said.

There is ``more than a slim chance of (U.S.) stock prices declining sharply,″ the EPA said in its report. ``If stock prices were to fall sharply, the effect... on overseas markets would be serious.″

The report said rising oil prices have raised fears of inflation in the United States, a threat the Federal Reserve has sought to counter by raising interest rates.

Despite the EPA’s cautionary tone, it remained generally optimistic about Asia’s short-term prospects.

It cited International Monetary Fund predictions that Japan’s economy would grow 1.0 percent in the fiscal year through March 31, and that the economies of the Association of Southeast Asian Nations _ among the worst hit by the regional financial crisis _ would expand 1.4 percent.

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