Koizumi says Japan's economy recovering, vows to fight deflation

Japan's economy is recovering on the back of rising consumer spending and improving corporate profits, Prime Minister Junichiro Koizumi said Friday while vowing to keep fighting deflation. "Without relying on government pump-priming, Japan's economy has been recovering on an improvement in corporate earnings and an increase in capital and consumer spending," he told parliament. Koizumi's remarks came after the government formally adopted forecasts Friday of 1.6 percent growth and a slight 0.1 percent inflation rate in the fiscal year to March 2006. This compared with estimates of 2.1 percent growth and a 0.1 percent fall in prices for the current year to March 2005. Koizumi said that substantial reforms had put the economy on a better footing to stage a recovery and vowed to continue with them to counter the threat of deflation. "As we are seeing the buds of reform, we must turn them into a big tree," he said, adding: "The government and the Bank of Japan together will fight deflation". He said that non-performing loans at major Japanese banks had been cut sharply since he took office in April 2001 and pledged to press ahead with further structural reforms.