Many Japanese are worried about the future, dampening consumer spending. That is unlikely to improve at a time when corporate bankruptcies and unemployment are expected to rise. Exports and business investments are unlikely to pick up and consumer spending remains the only hope for the economy, as the recent fall in prices helps stabilize spending, Kato said. At the same time, fears have been growing about a downward spiral of deflation that pulls down corporate profits, employment and the entire economy. The Japanese government has targeted 1.7 percent economic growth for fiscal 2001 that began in April.
Analysts say the forecast is too ambitious.
Economy Minister Heizo Takenaka acknowledged Monday it would be very difficult to attain 1.7 percent growth. But he added that extra government spending was ineffective in turning around the economy. The government data show that consumer spending remained flat in the Janauary-March period, versus a dip of 0.6 percent in the quarter ending in December. Exports sank 3.6 percent for the quarter ending in March, while it rose 0.8 percent the previous quarter. Japan's economy, the world's second largest, has not been able to revive since the last boom burst in the early 1990s.