Although an anticipated economic recovery in the United States may help Japanese fortunes during the latter half of 2002, the overall tone of the domestic economy will remain weak due to accelerating deflation and slack capital investment.
The economy will probably contract for the second straight year through fiscal 2002. Some economists are even warning that an economic crisis lies ahead, given the growing downside risks associated with the unstable financial system.
The administration of Prime Minister Junichiro Koizumi, which is placing more emphasis on initiating structural reforms than introducing economic stimulus measures, is forecasting zero growth for fiscal 2002 following a projected 1 percent contraction in the current fiscal year to March 31.