Jul. 31--TOKYO -- Fujio Mitarai, chairman of the Japan Business Federation, said Thursday that the export-dependent Japanese economy and companies are being hit severely by rising raw material costs and the prolonged slowdown of the U.S. economy.

"The Japanese economy is currently in a fairly severe situation," Mitarai told reporters at the Foreign Correspondents' Club of Japan.

"Corporate performance and business confidence are deteriorating," he said, citing Japan's lackluster personal spending, capital investment and housing market.

The head of the nation's most influential business lobby known as Nippon Keidanren also expressed regret about the collapse of the global trade talks under the World Trade Organization on Tuesday, but called for patient efforts towards a breakthrough in the long-running Doha Round process.

"I strongly hope for an early conclusion through continuing efforts in steady negotiations," Mitarai, who also serves as chairman of Canon Inc., said.

Although Mitarai said the Japanese economy is not entering a recession, he warned that massive pressures were weighing on Japan's corporate revenues with import costs rising from steep increases in natural resource and food prices.

He also suggested the softening of the subprime-hit U.S. economy may continue into next year, revising his earlier forecast that it will pick up during the second half of this year.

"The financial capital turmoil is not showing any signs of ending and housing prices are continuing to decline with consumption also weak," Mitarai said.

"The slowdown of the U.S. economy casts a dark shadow on the Japanese economy," which depends heavily on exports to the huge U.S. market, he said.

The Keidanren chief also called on Japan to strengthen the WTO regime and to promote free trade and economic partnership agreements to take advantage of the "dynamism of market expansion brought about by globalization." He also repeated the business lobby's demand that Japan's consumption tax be raised to secure stable revenues for the nation's social pension system, jeopardized by a rapidly plunging birthrate and aging population.

"Japan's fate will be at stake down the road unless we tackle the extremely important and difficult challenges we face today," Mitarai said.

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Story Source: Kyodo News International, Tokyo