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Forecast for the Japanese Economy In Fiscal 2003/2004: August 2003

Summary

1. Current State of the Japanese Economy and Outlook for Fiscal 2003/2004

1. Current State of the Japanese Economy

2. Views of the Economic Outlook

a. Will the Recovery Gain or Lose Momentum?

b. How Serious Will the Downturn Be?

c. When Will the Economy Begin to Recover Again?

2. Revised Economic Outlook for Fiscal 2003/2004

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 2003/2004

a. Fiscal 2003: Second Consecutive Year of Positive Growth, But Slowdown Is Expected in Second Half

b. Fiscal 2004: Negative Growth in Real and Nominal GDP, But with Signs of Recovery at Fiscal Year-End

3. Outlook by Demand Component

1. External Demand: Will make a positive contribution as the world economy recovers

2. Corporate Sector: Slowdown in the Second Half of Fiscal 2003

a. Production: Declining Trend to Begin in Latter Half of Fiscal 2003

b. Corporate Profitability: Pace of Improvement Is Slow, and a Downturn Is Expected in Latter Half of Fiscal 2003.

c. Private Capital Investment: Slowdown Forecast Entering 2004

d. Private Inventory Investment: Positive Contribution in Fiscal 2003

3. Harsh Employment and Income Environments Will Continue, but Household Sector Spending to Increase Marginally

a. Employment and Income Environments: No Major Improvement

b. Private Consumption: Will Continue to Be Restrained Because of Harsher Conditions Accompanying the Economic Downturn

c. Private Residential Investment: Surge in Demand due to Upcoming Expiration of Housing Loan Tax Relief Will Be Temporary, Underlying Downtrend to Continue

4. Government Expenditure: Public Investment to Continue to Decline but Government Consumption Will Remain a Positive Contributor

a. Public Investment: Downtrend Will Continue

b. Government Consumption: Upward Trend due to Expansion in Medical and Nursing Care Expenses

5. Price Levels: Deflationary Trends to Persist

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