BoJ admits 'we are in recession'

A WARNING that Japan's economy will shrink by as much as 1.2% this year was issued by the Bank of Japan as industrial production in September sank to levels last seen in 1994.

In its latest economic forecast the BoJ admitted what economists have been saying for months - Japan is in recession, and is going to stay there for some time to come.

The Bank said gross domestic product would contract by between 0.9% and 1.2% in the year to March 2002, and would probably shrink a further 1.1% in the following year.

Deflation was also expected to continue with consumer prices falling around 1% this year, but the BoJ said it would leave monetary policy unchanged.

Much of the blame for the descent into recession was laid on a mixture of last month's terror attacks on the US, and planned economic reforms in Japan.

The report came out alongside figures showing industrial production plunged 2.9% in September, more than twice the forecast made in recent surveys. Companies also said they planned to cut output by a further

0.5% in October, raising fresh fears of more massive lay-offs which are destroying consumer confidence, and depressing domestic consumption.