Last year saw a gradual upswing in the Japanese economy. The stock market revived and many Japanese corporations earned record profits. The average stock price at the Tokyo Stock Exchange has risen by about 40 percent in the past year. Toward the end of 2005, it topped 16,000 for the first time in more than five years.
The Bank of Japan's "tankan" quarterly business survey released in mid-December showed companies turning more optimistic amid increasing exports and firm domestic consumption. Industrial production was growing, with the November output index rising to 103.5, the highest since 1998 under the current statistical method. Thus the government projects modest economic growth of 1.9 percent in fiscal 2006 -- 1.5 percent from domestic demand and 0.4 percent from exports.
The government even expects the consumer price index to register a year-on-year rise of 0.5 percent and the GDP deflator, which reflects general price movements, to rise by 0.1 percent -- further signs that the economy may be ridding itself of the deflationary pressure that began in 1998.