Forecasts from 30 economists produced an average prediction of a 1.6 per cent contraction in real gross domestic product (GDP) for fiscal 1998-99 which ends in March 1999. Only two economists predicted growth.

The poll was conducted from October 5 to October 7 and showed forecasts had been slashed from the previous survey in July. The July survey had provided an average forecast of 0.1 per cent shrinkage for 1998-99.

As for 1999-2000, the economists predicted that the economy would post meagre growth of 0.1 per cent.

Pressured by a growing string of depressing economic data, the government last week revised down its GDP forecast for this fiscal year to a contraction of 1.8 per cent, cutting its optimistic initial forecast of 1.9 per cent growth.

Under the forecast, Japanwould mark its first postwar string of two fiscal years of decline. GDP in 1997-98 fell a real 0.7 per cent.

Economists said that a vicious cycle in the economy was unlikely to disappear any time soon as they expected little help from the government's economic stimulus measures.

Positive effects from already announced public works spending may be limited as local governments were facing problems and finding it difficult to finance their portions of the projects, they said.

Economists blamed moribund domestic demand, falling prices, weak capital spending and problems in the bad-loan laden banking sector for dragging down the economy.

The outlook for industrial production was bleak due to firms' prolonged inventory adjustments, with economists predicting a fall of 7.1 per cent industrial growth rate.

Worries over declining income and record high jobless rates are likely to offset positive effects from tax cuts of over six trillion yen, which were promised by prime minister Keizo Obuchi and weredesigned to boost consumption, they said.

Economists expressed concern about a possible slowdown in the US economy, which would likely dampen Japan's exports -- the main pillar of the nation's faltering strength -- to the United States.

"Exports to Asia have already dropped, and if exports to the United States were also to fall, the Japanese economy would no longer be supported by external demand, either," said Yasuo Yamamoto, an economist at Sanwa Research.

An advisory panel to the prime minister on Wednesday called for additional fiscal spending of well over 10 trillion yen to push up Japan'sw GDP to around zero per cent this fiscal year.

The move came just one day after Japan's lower house of parliament approved a plan to inject 43 trillion yen into the nation's embattled banking sector.

Economic planning agency minister Taichi Sakaiya, meanwhile, said on Tuesday that the government had been mulling fresh economic steps since last week.

But some economists said the nation's economic ills couldnot be fixed easily.

"Even if additional steps were implemented, they would not have much of an impact as they won't quickly make up for the current shortfall in demand against supply in the economy," said Yutaka Takei, an economist at Wako Research Institute.