Japan close to bottom, says Takenaka

By Alex Frew McMillan
CNN Hong Kong

TOKYO, Japan -- The Japanese economy is close to bottoming out, according to Economics Minister Heizo Takenaka.

Despite poor popularity ratings for the administration of Prime Minister Junichiro Koizumi, analysts agree that the world's second-largest economy may be turning the corner. They are watching for more signs of stability.

Takenaka told a television show on Sunday that the economy was near its bottom, in cyclical terms. He gave a news conference afterward.

But a likely rebound does not mean the Koizumi administration should veer from its reform course, Takenaka insisted.

In fact, he said, it is important to push ahead with those painful changes because the economy is recovering.

"Because it is doing so, we must press forward with structural reforms and we hope to do that," he said, according to Reuters wire service.

Heady rally for stocks

The stock market seemed to be buying his line of reasoning on Monday. The benchmark Nikkei index was up 5.12 percent at 11,365.69 at the noon break.

The broader Topix index was up 4.02 percent at 1,071.60.

Markets are also encouraged by the way banks have allowed construction company Sato Kogyo Co. to go under. It collapsed under more than half a trillion yen in debt.

Investors are rewarding the bold move by its lenders. The construction company's main creditor is Dai-Ichi Kangyo Bank, one of the subsidiaries of Mizuho Holdings.

Mizuho, the largest bank group in the world by assets, is up 8.85 percent at 283,000 yen at the noon break.

All the four large bank groups are showing good gains. UFJ Holdings, for instance, is up 7.51 percent at 315,000 yen.

A cornerstone of the Koizumi reforms is to push banks to tackle their bad debts. That aim saw a setback when lenders bailed out supermarket chain Daiei in January. But the reform process appears to be back on track.

Sato Kogyo is the ninth public company to go under this year in Japan. Only 14 public companies went under all of last year.

Slide for wages seems to have eased

Koizumi has warned Japan to brace for radical and painful change, as the country tries to work its way out of a decade-long slump.

Fresh figures from the Ministry of Health, Labour and Welfare showed on Monday that total wages fell 2.3 percent in January, over the same time last year. But economists were encouraged that the declines seem to be stabilizing after a 3.7 percent drop in December.

Total employment fell 0.6 percent over the same time last year.

"This report provides more evidence that the business cycle is turning," J.P. Morgan economist Ryo Hino wrote in a report.

Last week, Japan's record jobless rate showed a surprise drop, falling to 5.3 percent in January from its adjusted rate of 5.5 percent in December.

A poll in the Mainichi Shimbun conducted over the weekend shows that Koizumi's popularity has fallen to 49 percent, the lowest since he took office last April.

But Marc Hendricks, global chief economist at SG Securities, told CNN that too is good news for Japan's economy.

"The worst thing that could have happened to Japan was a very popular Koizumi because it delayed what needed to be done, and gave the hope that one individual could turn around the whole situation," Hendricks said Monday.

A separate poll in the Asahi Shimbun shows that support for Koizumi's Liberal Democratic Party is much lower, at 28 percent.

The Asahi poll shows a popularity rating for Koizumi's cabinet of 44 percent.