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Forecast for the Japanese Economy In Fiscal 2003: November 2002

Summary

1. Current State of the Japanese Economy

1. Japanese Economy in the Process of Recovering

2. Signs of Recovery in Domestic Demand

3. Signs of Slowing Exports, Which Have Been a Driving Force

4. Growing Concerns about Future Trends

2. Outlook for Fiscal 2002 and Fiscal 2003

1. Environment Surrounding the Japanese Economy

World Economy

Foreign Exchange Rates

Crude Oil Prices

Fiscal Policy

Monetary Policy

2. Outlook for Fiscal 2002 and Fiscal 2003

a. The emergence of a slowdown in the world, which thus far has acted as a driving force for the Japanese economy

b. The concern that private capital investment may not recover as confidence has deteriorated and prospects for corporate profitability have declined

c. The concern that the economy may suffer a downturn as a result of factors unrelated to the business cycle, including the accelerated disposal of non-performing loans

3. Outlook for Components of Final Demand

1. External Demand

2. Weakness in the Corporate Sector to Continue in Latter Half of Fiscal 2002, with Deceleration in the Latter Half of Fiscal 2003

Production: After a lull for the time being, downward trend expected in the latter half of fiscal 2003

Corporate profits: Continued improvement through the first half of fiscal 2003 but deterioration thereafter

Capital investment: Lacking in robustness, will decline in the latter half of fiscal 2003

Inventory investment: Higher growth rates in fiscal 2002 and fiscal 2003

3. Employment and Income Environments to Improve, but with Only Marginal Improvement in the Household Sector

Employment and income environments

Corporate profits: Continued improvement through the first half of fiscal 2003 but deterioration thereafter

Private consumption: Owing to deterioration in disposable income and consumer confidence, consumption is stagnant.

Private residential investment: Condominium starts and overall housing investment on a declining trend

Public works investment: Continuing downward trend

Price levels: Deflationary pressures to ease only temporarily

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