A "growth recession" in Japan? That, in fact, is what economist Lawrence D. Krohn of Shearson Lehman Brothers Inc. spies in the latest data emanating from Tokyo. Housing starts in Japan fell for the eighth straight month in June, plunging at a 26% annual rate in the second quarter. Manufacturing output declined at a 3.1% annual rate in the same quarter, and new orders received by machinery makers dropped at a 5.6% clip. New-car sales also have been down on a year-to-year basis for 10 straight months.
"Sharply slowing foreign demand, a prolonged housing slump, and an abrupt pause in plant-and-equipment spending have finally broken the impressive Japanese growth trend of the past several years," says Krohn. Although Shearson Lehman expects Japanese authorities to report that the nation's gross domestic product was flat to slightly negative in the second and third quarters of this year, the firm thinks growth will hit 3% in the coming quarter.