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Revised Forecast for the Japanese Economy In Fiscal 2003: February 2003

Summary

1. Current Sate of the Japanese Economy and Outlook for Fiscal 2003

1. October-December Quarter of 2002: Fourth Consecutive Quarter of Growth

2. Will Downward Trend in Inventories Become More Prominent?

3. Will Exports Slow Down because of Deceleration in Overseas Economies?

4. Will Slowing Private Consumption Pull the Economy into a Recession?

5. Will Capital Investment Rebound?

2. Outlook for Fiscal 2003

1. Assumptions Underlying the Forecast

a. World Economy

b. Exchange Rates

c. Crude Oil Prices

d. Government Fiscal Policy

e. Monetary Policy

2. Economic Outlook for Fiscal 2002/2003

3. Outlook by Demand Component

1. External Demand: Neutral for Economy in Fiscal 2003 Owing to Higher Imports

2. Corporate Sector to Decelerate in the Second Half of Fiscal 2003

a. Production: Slight Recovery in the First Half of Fiscal 2003, but Downward Trend in the Second Half

b. Corporate Profits: Ongoing Improvement through the First Half of Fiscal 2003, but Worsening Thereafter

c. Private Capital Investment: Modest Recovery Continues, but Decline Likely in the Second Half of Fiscal 2003

d. Inventory Investment: Negative Contributions to Growth in the Second Half of Fiscal 2003

3. Employment and Income Environments Will Improve, but Recovery in Household Sector Will Be Marginal

a. Employment and Income Environments: No Expectation of Major Improvement

b. Private Consumption: Consumption to Remain Virtually Flat; Increasing Burden of Social Security Holding Down Consumption

c. Private Residential Investment: Downward Trend to Continue; Surge in Demand Prior to Expiration of Housing Loan Tax Relief Measure Not Expected to Be Great

4. Public Works Investment: Keep Flat Helped by Implementation of Supplementary Budget in the Second Half of Fiscal 2003

5. Price Levels: Deflationary Pressures Remain

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