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The economy will shrink by an average annualized rate of 4.1 percent in fiscal 2009 after shrinking by an expected 2.9 percent in fiscal 2008, which ends next month, according to dire forecasts by eight major private economic research institutes as of Thursday.

If the projections for real gross domestic product for fiscal 2008 and 2009 come true, they will be steeper than the 1.5 percent contraction Japan saw in fiscal 1998. That was the worst on record.

Norinchukin Research Institute said both domestic and external demand would stay in the doldrums and the economy will continue worsening until the global economy begins improving in the middle of fiscal 2010.

Most think tanks believe exports will continue to drop sharply amid the global economic downturn and the economy will drop deeper into a vicious circle in which consumer spending falls in step with corporate cutbacks in production, workforces and wages.

All of the think tanks’ forecasts are far below the government’s official projections, which are 0.8 percent contraction for fiscal 2008 and zero growth for fiscal 2009.

At the earliest, they predict the economy will post an average gain of 0.7 percent in fiscal 2010, which will be the first turnaround in three years.

The think tanks include NLI Research Institute, Mizuho Research Institute, Dai-ichi Life Research Institute, Meiji Yasuda Life Insurance Co., Financial & Economic Research Center of Nomura Securities Co., Mitsubishi Research Institute and Daiwa Institute of Research.

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