The general background to this is that many firms continue to keep a tight lid on inventories so as to increase their balance-sheet efficiency. By industry, while inventory adjustment pressure remains in the IT-related sector, inventory conditions in the materials and machinery industries have actually tightened with firms in these industries unable to produce fast enough to meet increases in shipments.
Inventory adjustment in the IT-related sector is expected to be relatively mild since IT-related manufacturers have promptly reduced their pace of production. In this situation, it is unlikely that inventory adjustment will cause the economy to deteriorate. III. Developments in overseas economies  There have been periods when developments in external demand rather than domestic demand have posed greater downside risks to Japan's economy.