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TOKYO, JAPAN - JAPAN'S recovery from recession in the 1990s appears to be stalling, with Asia's largest economy in 'an extremely severe situation', the head of the country's top business lobby said on Thursday.
Japan's economy is 'at a crossroads', warned Japan Business Federation (Keidanren) chairman Fujio Mitarai, who also heads technology giant Canon.
'The Japanese economy is currently in an extremely severe situation. The economy has clearly levelled off since the end of last year', he told a press conference at the Foreign Correspondents' Club of Japan.
Japan's economy has enjoyed a gradual recovery in recent years from a decade-long slump but there are concerns that the revival is now stalling due to a worsening global economic climate and soaring commodity costs.
Higher energy prices are eating into Japanese corporate profits and acting like a tax on consumers. At the same time slowing economic growth in the United States and Europe is curbing Japanese exports, a key growth driver.
'I was initially projecting the US economy would recover by the second half of the year. However, this needs to be revised', said Mr Mitarai.
'Financial market turmoil is showing no sign of ending. The Japanese economy depends on overseas demand and the US economic slowdown is casting a shadow' over its prospects, he added.
A drop in Japan's industrial output in June along with a rise in unemployment and the fastest inflation in a decade have added to concerns about the health of the world's second-largest economy.
However, Japan is unlikely to slip into recession, Mitarai said, echoing the view of the International Monetary Fund (IMF) which said in a report earlier this week that Japan would have only a 'modest' slowdown.
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