TOKYO — In a significant shift, the government admitted Monday that Japan's economic hangover from the 1980s is not going to be over soon and that the condition may even get worse.
The government's main economic forecaster, the Economic Planning Agency, acknowledged that business conditions are worsening, and for the first time since August, 1994, it deleted the word recovery from its carefully worded monthly report.
It was forced to change its evaluation after industrial output and shipments fell steeply in July from June while inventories rose to the highest level since the last quarter of 1993. Output is expected to fall 4.3% this month compared to the same month a year ago.
Unemployment remains at a record high of 3.2%, and the ratio of job offers to job seekers has been falling.
Japan's economy has been struggling since the "bubble" of easy credit and soaring land and stock prices began to collapse in 1991. Banks have been left with hundreds of billions of dollars in bad loans, many to companies that went bankrupt when the value of their land holdings plunged.
Although the slowdown was not a surprise after the boom years of the late 1980s, its resistance to all types of government remedies has surprised economists.
After a cut last week, the central bank's key lending rate now stands at 0.5%, a record low for Japan. Home buyers soon will be able to get a floating-rate loan from banks for less than 3%.
And the government has repeatedly pumped money into the economy with public works programs and tax cuts. Another package is expected Sept. 20.
To explain the length of the doldrums, economists cite the high yen, which has eaten into the profits of Japan's exporters and hurt consumer confidence, and the slow-moving reform of structural problems such as excessive government regulations.
There were two positive notes last month, however. After shooting to record highs against the dollar earlier in the year, the yen has fallen back to its levels of January. Stock prices have risen as well, since falling near a nine-year low in the summer.
That's why the Economic Planning Agency was not ready to say Japan has fallen into a recession, preferring to use the milder weakening.