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Tokyo Optimistic on Economy Despite High Yen

July 15, 1994

TOKYO (AP) _ The government on Friday issued a relatively optimistic report on the economy, indicating that Japan’s nascent economic recovery may survive the yen’s jump to record levels.

The yen has risen 13 percent against the dollar this year, alarming export- dependent companies. Many cannot profit on sales abroad if the yen stays around Friday’s closing level in Tokyo of 98.30 to the dollar.

Still, the government said ″bright signs are gradually spreading″ in the economy, citing improved retail sales of autos and electronics. Officials said that businesses have reduced their inventories, removing a drag on production.

The government said, however, that the strong yen was a topic ″to be concerned about.″ Masahiko Komura, head of the Economic Planning Agency, said the Cabinet would discuss emergency measures to prop up the economy should it deteriorate due to further surges in the yen.

Separately, the Finance Ministry reported Friday that Japan’s trade surplus rose 15 percent in June from a year earlier to $11.35 billion. The surplus with the United States was $4.73 billion, up from $3.30 billion.

For the first half of 1994, the worldwide surplus totaled $60.01 billion, up 5.1 percent from the same period last year, while the surplus with America was $24.53 billion, up 3.4 percent. The figures are not seasonally adjusted.

Also Friday, the private credit research agency Teikoku Databank Ltd., said business failures were up 2.1 percent in June from a year earlier. But debts left behind by insolvent companies were down 24 percent from the year before.

Teikoku Databank said the rising yen could force more subcontractors into bankruptcy as major companies buy more parts and supplies overseas.

On Thursday, the private Japan Research Institute Ltd. said the move toward foreign suppliers could cause Japan’s unemployment rate to rise from the current 2.8 percent to over 6 percent by the end of the decade.

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