Recent weaker-than-expected economic indicators do point to a slowdown in Japan's hard earned economic recovery but this is likely to prove only temporary and it should pick up again by mid-2005, analysts said.
They said Japan has disappointed many times in the past but this time things are different - the banks have drastically reduced their bad loan burdens and companies have pressed ahead with often painful restructuring programs to leave them in better shape.
The economy has progressed steadily since January 2002, with strong upward momentum emerging in mid-2003 thanks to booming exports of hi-tech goods and machinery, especially to China.
That positive picture has been troubled, however, by recent data showing among other things a sharp slowdown in growth in the second quarter, disappointing industrial output figures for July and unemployment in July rising to 4.9 percent from 4.6 percent in June - the first such deterioration in six months.
"Industrial output will peak out in the October-December quarter and a cyclical slowdown in the semiconductor demand will hit the electronics sector, which will see diminished demand for exports," said Junichi Makino, economist at Daiwa Institute of Research.
"However, other sectors are not likely to suffer sluggishness. There is no need to be pessimistic," Makino said. "The economy will start to recover from spring (around April) and will return to a steady recovery in the July-September quarter of 2005."
The consensus view of 14 think-tanks and brokerage houses in Japan put growth in the year to March 2005 at 3.5 percent, followed by 1.7 percent in the year to March 2006.
The economy grew 3.3 percent in the year to March 2004, the fastest rate since 3.6 percent in the year to March 1997.