Top economists at the World Economic Forum are dismissing predictions that Japan's economy is on the rebound.
The chief economist for Europe's biggest financial institution, Deutsche Bank, says Japan's economy is likely to remain in recession for several months.
Norbert Walter says Japan must reverse the deflation that is holding back necessary modernization of the domestic economy. He advocated a sharp devaluation of the yen, all the way to 240 yen to the dollar, in order to boost exports and stimulate a domestic recovery.
The yen is now trading at about 125 to the dollar.
Japan has been in an economic slump for the past decade.
But another expert addressing the Economic Forum, American Express Chief Economist Daniel Laufenberg, said Japan must address its structural problems and not rely on a devalued exchange rate.
"They have to approach their internal problems. I do not think they should be expected or be allowed to export their way out of their situation," he said. "I think domestic demand growth is essential."
Another panelist, International Monetary Fund Chief Economist Kenneth Rogoff, repeated the Fund's prediction that Japan's economy is likely to grow by no more than one percent this year and next. Mr. Rogoff said the world economy will expand by 2.8 percent this year, rising to four percent in 2003.
Norbert Walter, based in Frankfurt, says structural rigidities prevent the 15 European Union countries from realizing their growth potential. "If we do not change mentality and policy orientation, we will continue to grow at something like two percent for this decade, which is not our potential," he said. "It is just the potential we have if we do not try harder. But at this time it seems Europe is not on its way to trying harder."
Mr. Walter says pension and unemployment systems in Western Europe are too generous, acting as strong disincentives to entrepreneurship.
The economists expressed confidence that the United States will experience growth rates of 2.5 to 3.5 percent this year and next.