Yoshiharu Taniguchi is a disappointed man.
A rapid rebound in Japan's economy this year was supposed to help fire sales of the high-tech ceramic chips that his company is a world leader in. It never happened.
"Our expectations proved to be wrong," the 66-year-old president of Nippon Ceramic said from his western Japan office.
"We had expected a rapid V-shaped recovery, but it's been much more gentle."
If economists are right, Taniguchi should prepare for more disappointment in the months ahead.
Even the mild recovery now seems to be on its last legs as a global slowdown hits exports and consumers wrap up for a chilly winter of falling incomes and financial anxiety.
Gross domestic product figures for July to September out today are expected to show the economy inched ahead, but many economists warn that could be the last growth for some time.
A fourth recession in a decade may have already begun, adding to the pressure on Prime Minister Junichiro Koizumi as he struggles to reform the economy while keeping it afloat.
"This is about as good as it's going to get during this cycle," said Jeffrey Young, an economist at Nikko Salomon in Tokyo, who expects the economy to have grown by 0.5 per cent in July-September but then shrink in the next two quarters.
A group of 25 analysts polled by Reuters turned in an average forecast of a 0.4 per cent rise from the previous quarter, slower than the 0.6 per cent rise in April-June, when Japan scrambled clear of its worst recession since the war.
That recovery was fuelled by a strong rise in exports - and in turn industrial production - that now appears to have stalled as the United States, Japan's biggest export market, stumbles.
Net exports are expected to have made a negative contribution to GDP in July-September for the first time in a year, and economists are hard-pressed to find an area of Japan's deflation-racked economy that can pick up the baton of growth.
"The pause in exports has come at rather an unfortunate time, just when it looks as if domestic demand was starting to pick up. The risk is that it chokes that off prematurely," said Richard Jerram, an economist at ING.
Surprising resilience in long-stagnant consumer spending in recent months may be the only thing keeping the recovery on track. Household spending leapt 5.4 per cent in September, for a fourth straight year-on-year gain.
Analysts have suggested that stingy consumers may have finally started to spend because they see little point in putting their money into the depressed stock market or the shaky banks.
But most economists are sceptical that consumer confidence, which is already showing signs of faltering, can survive a winter of rising job insecurity and falling incomes, with the prospect of war in the Gulf to boot. (Reuters)
"If the income numbers we're getting are anywhere close to the truth, it's going to be difficult for consumption to keep defying gravity... It's pretty ugly," said Young.
Unemployment is stuck near record highs and job insecurity is rising as the government prepares to implement recently unveiled plans to tighten the screws on banks and troubled firms.
Nor is life getting any easier for those with jobs. Annual winter bonuses are expected to see a record fall of around six per cent as firms step up their cost-cutting drive.
Output at Japan's factories and refineries is also showing signs of tailing off as industrial giants like Fujitsu Ltd and Hitachi Ltd feel the chill from falling exports and cut their earnings targets for this business year.
Another Reuters poll, this time of 20 economists, forecast a 5.2 per cent monthly rise in September core machinery orders, a forerunner of capital spending that will be released on Monday.
But rather than marking a recovery in firms' confidence, the rise would only be a technical rebound from a heavy fall in August. For the whole third quarter, the government estimates machinery orders fell 3.9 per cent.
One positive sign is that firms' inventories remain near 14-year lows, but the export slowdown is threatening this, too.
Economists will be watching closely this week for evidence that firms are starting to build up stocks again, signalling weakening demand and a further slowdown in output in the future.
Not all analysts are prepared to write Japan off as headed inexorably for recession.
"So far at least, it's been more of a loss of the momentum that we'd been building in the first half rather than an actual downturn... There's a sense we've levelled off," said David Cohen of S&P/MMS International in Singapore.
ING's Jerram noted, however, that a pause followed by renewed growth has been a rare event in Japan. He said the last time was in 1995, when the Kobe earthquake, a strong yen and fiscal tightening combined to temporarily halt a recovery.
One thing most agree on is that the economy will get little help from policymakers, who must have looked enviously at the United States last week when the Federal Reserve slashed interest rates in an effort to kick-start growth.
Japanese interest rates are already close to zero and the huge public debt precludes any big fiscal stimulus, while the government's recent plan to speed up the disposal of bad bank loans disappointed those who had been looking for decisive action to end the policy paralysis that has hobbled growth for a decade.