FY 2002 Economy to Grow 0.1% Based on External Demand
In fiscal 2002， while exports to the recovering U.S. economy will continue to lead Japan's modest recovery， weak domestic demand including the decline in business fixed investment will keep the economy's real growth rate near zero at 0.1%. Due to persistent deflation， the nominal growth rate will be negative at -1.0%. In fiscal 2003， real growth will improve to 1.1%， while nominal growth will hover near zero at 0.3%.
The recovery is fragile in that it is driven solely by external demand. Many hurdles impede a sustained expansion， including the sustainability of the U.S. recovery and risk of renewed financial system instability in Japan. Thus any attempt to slash the fiscal deficit poses a large risk of ending the recovery prematurely.