JAPAN'S ECONOMY REMAINS IN SHARP DOWNWARD TREND

JAPAN'S ECONOMY REMAINS IN SHARP DOWNWARD TREND

Japan's economic slowdown is worsening as inventory drawdowns continue to spread throughout key sectors, Prime Minister Kiichi Miyazawa was told at a Tuesday briefing.

Yuji Tanahashi, vice minister of the Ministry of International Trade and Industry, predicted that the on-going inventory adjustments probably would continue for some time, dampening the nation's industrial production.Meanwhile, corporate earnings are contracting and export growth is turning sluggish.

''The economy has been in a rather sharp downward tend, especially over the last three months of 1991," another official of the ministry informed Prime Minister Miyazawa. Output at Japan's mines and factories fell in three of the four quarters of last year, he noted, adding that there aren't any indications of a pickup in the economy.

Supporting the ministry's grim forecast was a report issued the same day by the Economic Planning Agency showing that Japan's leading economic indicator stood at only 27.3 percent in December, far below the "boom-or- bust" line of 50 percent for the 16th consecutive month.

The leading index, an indication of economic conditions from three to six months ahead, stood at only 25 percent in November. One agency official, commenting on the report, pointed out that the diffusion indexes suggest that the trend toward a recession appears strong.

In its report, the Trade Ministry stressed that the economy actually is increasing its deceleration tempo, which is thought to have started as early as last September. However, as in the past, the agency did not not actually use the word "recession" when referring to the state of the economy, preferring to refer to "depressed" or "stagnant" conditions when describing a sluggish economy.

In remarking on the statements of the ministry and the agency, an economic analyst of the Sumitomo Bank said it was likely that the inventory adjustments will continue into the third quarter. These adjustments, which began with a handful of industries, are now spreading to the processing sector, including raw materials, electric machinery and transportation equipment.

These bearish reports are considered certain to respark efforts by business leaders to obtain another lowering of the official discount rate (now at 4.5 percent) by the Bank of Japan to stimulate the economy. As late as last Friday, for example, Rokuro Ishikawa, chairman of the Japan Chamber of Commerce and Industry, urged another drop in the benchmark rate the central bank charges large commercial banks as interest for loans.

As with other senior Japanese business leaders, he complained that the Bank of Japan's stance on the economy is much too optimistic since it fails to allow for industries and regions that are harder hit than the economy as a whole.