Japan's gross domestic product in the first quarter of the year dropped 0.2 percent from the previous quarter, or 0.8 percent at the annualized rate, according to figures released Monday by the Cabinet Office. Economic indicators since April also show the economy is decelerating. Mr. Heizo Takenaka, the minister of economic and fiscal affairs, has all but acknowledged that the economy is in recession.

With prices also declining, concerns about a deflationary spiral will intensify. But don't expect any traditional stimulus package from Prime Minister Junichiro Koizumi's administration, which says there can be "no economic recovery without structural reform." It disapproves of old-fashioned pump-priming measures, such as increased public-works spending.

This is "a time of patience," as one Cabinet official puts it. The message is that negative growth is part of the price for the painful changes that must be made. The question is whether patience will prevail. The answer depends on whether Mr. Koizumi and his team can resist pressures from election-conscious political parties and the recession-wary business community. Basically, everything hinges on the administration's ability to assure the nation that prosperity will follow hardship.

The gloomy GDP report is expected to spark debate over policy questions, such as whether to expand the money supply and what kind of budget should be prepared for fiscal 2002. With Upper House elections approaching, however, cool heads must prevail. The danger is that politicized debates might lead to makeshift measures -- such as increased pork-barrel spending -- and throw a monkey wrench into the reform process.

The chief reason for the first quarter's negative growth is a decline in exports due to the slowing U.S. economy. Perhaps a better explanation is that domestic demand remained so weak that it could not offset the drop in exports. Consumer spending was flat, business investment dipped 1 percent and housing starts plunged 5.2 percent.

By contrast, public-sector capital formation increased 5.2 percent, indicating that the additional public-works package put together in fiscal 2001 shored up internal demand. This is likely to encourage the belief, held by advocates of time-tested stimulus measures, that public-works spending is a quick fix for economic recovery. That notion is as mistaken as it is old.

Mr. Takenaka and his colleagues are taking a different approach that aims for a sustainable recovery of private demand. A key step in this direction is cleaning up the banking sector's bad-debt mess. The presumption here is that the economy will not go into a deflationary tailspin, even though massive debt write-offs are likely to have a considerable impact. This assumption seems warranted, in part because corporate earnings have steadily improved over the past several years.

Pessimism has a way of feeding on itself. It is more reasonable to hope that improved business results will over time lead to growth in worker incomes and consumer spending. The decline in exports is unavoidable given the U.S. slowdown, but this does not necessarily mean that domestic demand will also decline. The challenge is to tackle structural problems that stand in the way of long-term domestic growth.

Mr. Koizumi has been saying that the nation may have to accept negative growth. The downturn in the first quarter may be a warning that we should be prepared for worse to come. But the government should keep up its reform efforts. If it relents, the public will feel even more uneasy about the future and question the administration's commitment to structural reform. The prime minister has said that things may get worse before they get better. This is a candid statement that should inspire public confidence in his leadership. He must stick to his guns and not worry too much about the GDP figures. If he waivers, his supporters -- who now make up an overwhelming majority of Japanese people -- will turn their backs on him.

The road ahead is littered with potholes, however. Mr. Koizumi's attacks on sacred cows -- reviewing the use of road tax revenues, transfer payments to local governments and public corporations -- are already meeting stiff resistance. Now it is likely that antireform forces, including members of his own party, will criticize him for tolerating the recession in the name of reform. As a result, his administration will likely face political pressure to prime the pump once again.

The prime minister should resist such temptations and press ahead with his reform programs, particularly banking and industrial reform. He has only one option -- to keep running -- if he is to carry the torch to the goal. In this sense, the first-quarter drop in the GDP has cut off the Koizumi administration's line of retreat.