TOKYO Japanese Finance Minister Kiichi Miyazawa on Friday insisted improving profits pointed to an economic recovery, even as Tokyo stock prices languished around two-year lows and the yen continued to slump. "The Japanese economy will recover from now on," Miyazawa told a news conference. "It is very clear when you look at corporate profits," he said. According to an AFP report, many major Japanese companies, especially those in hi-tech and "new economy" sectors, posted strong earnings in their interim results to September. Miyazawa was unperturbed by the yen's accelerating fall towards the 120-to-the-dollar level. In Tokyo trade Friday it dropped below 118 to the dollar for the first time since July 22, 1999. "If the yen falls significantly, the Japanese economy will be troubled, but there is no need for concern at this level," he said. "It has a favorable effect on exports. I am not very concerned about the current levels." Miyazawa also rejected the suggestion that the weak yen might deter foreign investors from buying Japanese government bonds. "Bonds are selling even better. Demand is very strong," he said. The minister's upbeat remarks were in stark contrast to comments in Washington Thursday by the influential former Japanese vice finance minister for international affairs, Eisuke Sakakibara. Nicknamed "Mr. Yen" in his heyday for his influence on currency markets, Sakakibara told a conference that Japan faces a "gloomy" economic outlook. "The outlook for the Japanese economy is gloomy. The Nikkei (stock index) may go as low as 12,000 points and if it breaks through that level you don't know how far it could go down," he said. The index closed Thursday at 13,201.07 points, its lowest level in 27 months, before recovering 146.67 points the following day. Miyazawa expressed some concern, however, over the off-loading of cross-shareholdings by companies ahead of the March fiscal year end, which is contributing to oversupply and the slump in stock prices. "I wonder whether it is appropriate for corporations to tighten the rope round their own necks, or not," Miyazawa said. Asahi Bank Research Institute's senior analyst Makoto Nagai said that Miyazawa's remarks represented an attempt to talk up the Japanese economy. "I think Miyazawa showed optimism to dispel fears over the Japanese economy," Nagai said, although he agreed with Miyazawa's overview of the economy. "Basically, corporate profits have been steady," he said. "The economy is not about to deteriorate further." The lower yen will have a more positive effect on Japanese corporate profits, much of which come from exports, than a higher one," Nagai noted. Japanese exporters need not fear for their markets because the United States has been easing fiscal policy, which should ensure its economy avoids a hard landing, he said. "The European economy will also not worsen as the European Central Bank (ECB) has become more sensitive to the state of the economy." Japan Research Institute senior economist Hidehiko Fujii said the Japanese economy would recover eventually rather than immediately. "I do not think the Japanese economy will recover in the next month or so because of the low stock prices and weak yen," he said. "But if we look ahead half a year, or a year, the picture will be totally different from the present. "The momentum of Japanese corporate investment has picked up, and their competitiveness has been further strengthening, which will lead to profits from the middle of this year."