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Germany, Japan signal hope

A KEY measure of German business sentiment rose this month, and raised its economic outlook for the first time in three years in further signs the worst of the global recession may be over, with stability seen later this year.

German think tank Ifo's business climate index, based on a poll of 7,000 firms, rose to 84.2 this month from 83.7 last month but below a consensus forecast for 85.

"This is a further clear signal that the German economy's tailspin has ended. The recession has lost its velocity. It could even be over by the autumn," Commerzbank economist Joerg Kraemer said.

"No one should overestimate the strength of the upturn. It will be an expansion without any real power," Kraemer added.

In Tokyo, the government raised its outlook for Japan's economy for the first time in three years, saying the pace of recession was slowing as exports and industrial output appeared to be near the bottom. Previously, the government had said the economy was worsening rapidly.

Separately, Bank of Japan Governor Masaaki Shirakawa also said both the Japanese and world economies appeared to be bottoming out but any recovery would be mild because it would take time to get rid of the excess of boom years.

European Central Bank governing council member and German Bundesbank President Axel Weber said there were growing signs the economic decline in Germany and euro zone was ebbing.

But those signs were sporadic and should not be overplayed, although the impact of government stimulus programs would hopefully build through the rest of the year, he said.

"There is definitely hope that the euro zone economy will gradually stabilize in the later part of 2009."

In the United States, the Federal Reserve is likely to keep interest rates near zero for a while yet, Fed Vice Chairman Donald Kohn said over the weekend. "The economy is only now beginning to show signs that it might be stabilizing, and the upturn, when it begins, is likely to be gradual amid the balance sheet repair of financial intermediaries and households," Kohn said.


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