But along with his upbeat message at the start of the new 150-day parliament session came a bleak view expressed by his economic planning minister, Taiichi Sakaiya, who told parliament Japan is facing a time of "national economic crisis".

Obuchi raised no new initiatives to spur flagging domestic demand and instead stuck to a package of stimulus measures lodged in the draft fiscal 1999 budget.

"I am confident that the economy will recover in fiscal 1999 (starting on April 1)," Obuchi said in the key section of his speech.

"This year will be christened the year of economic revitalisation, a year in which the economy experiences an autonomous recovery springing forth from the recession which hangs over our inherent abundance," he said.

Eyebrows were raised at the starkly different outlook expressed bySakaiya, head of the Economic Planning Agency.

Known for being bluntly forthright, Sakaiya said: "The nation's economy is in what might be called a national economic crisis as it faces its worst postwar recession with an (expected) economic contraction for a second consecutive year."

Nonetheless, Sakaiya said Obuchi's 0.5 per cent growth target could be achieved by revitalising Japan's financial system, boosting demand and taking steps to shore up the hard-pressed labour market.

The 0.5 per cent target has been roundly criticised as unrealistic by financial analysts, who cite the ongoing bad debt problem and feeble consumption which shows no sign of strengthening. Many analysts have posited as low as minus 2 per cent growth for the next fiscal year.

Turning to foreign policy, Obuchi twinned the speedy passage of new defence guidelines which spell out cooperation with the United States to a strengthening of relations with Washington.

"In order to make the Japan-US relationship the laws related to theguidelines for Japan-US defence cooperation must be enacted as soon as possible," Obuchi said.

The parliament session is expected to feature bitter arguments over the role of Japan's military and a conservative move to reform the nation's anti-war constitution to expand that role.

Obuchi's hawkish new coalition partner, Liberal Party leader Ichiro Ozawa, has pushed for constitutional reform, and any talk of tampering with the constitution raises hackles both in the opposition camp and among dovish sectors of Obuchi's ruling Liberal Democratic Party (LDP).

Obuchi alluded to an expanded military role in his speech.

"I intend to strive to gain the full understanding of the Japanese people for even greater cooperation by Japan in terms of assistance to developing countries and assistance for United Nations peacekeeping operations, including the unfreezing of restrictions on involvement in peacekeeping force activities," Obuchi said.

Obuchi devoted a large part of his speech to the tense situation on theKorean peninsula following a North Korean missile launch over Japanese territory in August.

Japanese trepidation over North Korea was further heightened after a sea battle in December between a North Korean submarine and the South Korean navy in waters near Japan, and the discovery of North Korean sailors whose bodies were found washed up on Japan's northwestern coast.

Obuchi was conciliatory and held the door open to dialogue with Pyongyang.

"Japan is ready to achieve improvements in its dialogue and exchanges with North Korea, provided that it indicates that it is ready to take a constructive attitude," Obuchi said.

But his main concern was Japan's troubled economy and fears that it will cause an unraveling of the nation's traditional values of social cohesion, respect for others and sense of order.

"The time has come to break out from the pessimism which pervades our society," Obuchi said. "The time has come for us to be firm in our resolve and move forward fortified by a spirit of constructiveoptimism."