Japan’s finance minister, Mr Masajuro Shiokawa, said today he had been too optimistic about Japan's economy when he took office three weeks ago and that he now saw increasingly worrying signs.
In his first grilling at the Lower House fiscal and financial committee, Mr Shiokawa not only backtracked on his growth outlook but also inched away from Prime Minister Mr Junichiro Koizumi's much-hyped policy of fiscal discipline.
The remarks come less than a month after Mr Koizumi swept to office amid record popularity ratings, and the comments underscored doubts about whether he is failing to capitalise on his early promise.This feeling was reflected in the stock market as the benchmark Nikkei lost 1.52 per cent to 13,835.04 points by midday.
Mr Shiokawa repeated Mr Koizumi's intention of keeping a lid on deficit-spending but said a policy of reallocating the budget more efficiently alone may not be enough to put the world's second-largest economy back on track to growth.
Mr Shiokawa - who last month said the economy had hit a bottom and that he was no expert on economics - said a slower-than-expected recovery in the US economy and a slowdown in the high-tech industry were forcing him to take a harder look at growth prospects.
"At the time, my analysis was not very deep, although I did have a feeling that it was getting better as spring came," Mr Shiokawa said.
"But now, the government's assessment of the economy in its monthly report last week was that it was 'weakening further', and I am certainly worried about it."
Falling prices were casting a chill on corporate sentiment, leading to lacklustre output and capital spending, he said.