Japan's Economy Grows For Record Fifth-Straight Year

Domestic demand expected to remain strong.

TOKYO (AP) - The Japanese economy has grown for a record five consecutive years, though consumer prices remain flat and consumer spending is weak, a government report said Monday.

Also Monday, International Monetary Fund chief Rodrigo de Rato urged Japan's central bank to take heed of sluggish prices in setting its monetary policy at a speech in Tokyo.

In its economic report for January, the Cabinet Office said the economy continues to recover, but that robust corporate profits had yet to trickle down to wages, reiterating its view from the previous month.

The report also showed that Japan's economy logged its 60th consecutive month of growth since February 2002, surpassing the previous 57-month record set between October 1965 to July 1970.

Looking ahead, the government expects the economy to stay on the recovery track as high corporate profits feed more into the household sector and boost domestic demand, the report said.

The mixed assessment of the country's economy was expected to increase government pressure on the central bank to hold off from an early hike in interest rates.

Just last week, the Bank of Japan's policy board decided to keep its benchmark interest rate steady at 0.25 percent following a series of stern warnings from top government officials not to raise rates too quickly, making borrowing more expensive and choking off the economic recovery.

The decision was seen as a retreat for the BOJ, which had faced similar political warnings last July but went ahead and raised interest rates for the first time in six years to 0.25 percent from virtually zero.

Analysts have warned that the perception of political meddling in monetary policy could make international investors reluctant to commit money to Japan. Some say the government wants to keep interest rates low to support a weaker yen and boost exports.

Economy Minister Hiroko Ota said Monday following the report's release she hoped to soon discuss macroeconomic policy with central bank officials.

''I want to talk with BOJ policy makers about the economy as soon as possible in order to ensure that the views between the government and the BOJ are shared,'' Ota told a press conference.

Ota has warned repeatedly that Japan has not yet beat deflation, or the spiraling cycle of falling prices that has hurt the economy for six years.

The nationwide core consumer price index rose 0.2 percent on year in November, the sixth monthly increase _ but that growth has been due largely to high oil prices, and officials warn the index could slip back to zero or fall below that once oil prices settle.

De Rato of the IMF said Monday at a private symposium in Tokyo that officials were right to be concerned about sluggish prices.

''Inflation is still very weak and private consumption needs to gather steam,'' de Rato, in Tokyo as part of a three-nation visit that will be followed by trips to Indonesia and China, told reporters.

''The competitiveness of the Japanese economy is not based on currency weakness,'' but rather on efforts made to reform the economy, he added.

Elsewhere, the report kept unchanged the government assessment of corporate profits and capital outlays, saying they were ''improving'' and ''increasing,'' respectively. The government outlook on exports and industrial production was also unchanged, with exports ''flat'' and output ''slightly rising.''

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