As Japanese companies can no longer absorb the entire negative impact of rising basic material prices with revenue growth, corporate profit trend will slow down further going forward.

Exports have maintained a relatively high level of growth because the decline in exports of information technology products has bottomed out -- the key factor which had sent the Japanese economy into a lull,

Due to lingering reconstruction demand in areas that were hit by hurricanes last year and brisk demand for Japanese cars that have better fuel efficiency, exports to the US are likely to be solid until around mid-2006.

New vehicle demand in the US is poised to peak out sooner rather than later, which may weigh on demand for Japanese (automobiles).

New vehicle demand in the US is bound to peak out this year, which may slow output for Japanese (automobile) makers, although to a much lesser extent than US makers.

Overseas demand for autos, IT goods and construction machinery which had long supported the overall economic activity in Japan, is now set to slow down, while input cost for Japanese companies is rising.