The bank now forecasts that developing countries will grow 5.4% this year, below its June estimate of 6.2%.

The bank has forecast higher write-offs of commercial real estate loans next year.

The bank, also based in Osaka, forecast lower earnings of 95 billion yen.

The bank had originally forecast growth of 3.3 percent.

But consumer prices have risen even faster, and the bank now forecasts that the inflation rate in 2004 could breach its target of 2 percent.

Local government organisations were the most negative about job prospects and banks also forecast further redundancies.

The bank has forecast that the country's economy will grow at a rate of 4 percent this year, down from more than 6 percent last year.

For 2004, the bank is forecasting 1.6 percent growth, down from 2.4 percent.

The central bank now forecasts 8.2 percent inflation for 2003, well above its target of 6.5 percent.

Until today the bank had been forecasting a net profit of 35 billion yen.