However, the improvements in corporate profits and sentiment have not stimulated business activities of many firms, because these firms still strongly feel that they have excess capacity and employees and that they should reduce their debts to restore financial soundness. In addition, efforts by firms to reduce personnel expenses have prolonged the severity of households’ income conditions.
As for the outlook, public investment is likely to pick up reflecting the progress in the implementation of the supplementary budget for fiscal 1999. This, along with the favorable financial environment created partly by the Bank’s monetary easing, is expected to continue underpinning the economy.