Operating Environment
In fiscal 2002, ended March 31, 2003, the Japanese economy overall remained in a serious state despite signs of a turnaround in some sectors. Capital investments showed hints of an upturn amid a general improvement in corporate earnings, but the trend was weak due to the perception among many companies that capital equipment levels remained excessive. Exports increased in the first half of the year, mainly to other Asian countries, but flattened out in the second half. Moreover, the employment situation remained severe as unemployment levels stayed high despite signs of increased hiring in the latter half of the year. Meanwhile, the growing instability of the world economy, partly due to the buildup to war in Iraq at the end of the period, as well as falling global share prices and other factors, threatened to suppress final demand in the domestic market.

Regional Economic Trends
A look at trends in our own region reveals that the production sector benefited from solid orders for high-value-added products amid strong demand for imported energy from large and medium-sized shipbuilding companies. Orders for bulk carriers were also healthy. However, ship prices were depressed by competition from South Korea and China, making it more difficult to secure orders. Orders and productivity in the heavy machinery sector also declined, although demand for electronic components continued to recover.
   Despite healthy sales of compact cars, consumer spending was affected by falling sales at large-scale stores, while the tourism sector languished amid declining visitors at major tourist sites and falling hotel occupancies.
   On the demand side, public works spending continued to fall, while the region benefited from a relatively healthy year of housing construction starts, especially of condominium buildings. Although the employment situation remained difficult, the active opening ratio climbed steadily, indicating a modest recovery. Conditions in the private sector showed signs of settling owing to year-on-year declines in bankruptcies and total debt. In February 2003, however, Huis Ten Bosch Co., Ltd, which operates a major tourist attraction, filed for reorganization under the Corporate Rehabilitation Law, increasing total corporate debt in the prefecture. However, getting that company back on its feet is a crucial issue, not only for Nagasaki Prefecture but for the entire economy of Kyushu. For this reason, public and private sector entities are uniting to form an ever-widening support framework to restore the Huis Ten Bosch attraction to its former glory.

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