TOKYO Japan's state minister for economic and fiscal policy said Sunday Japan had to pursue its reforms more vigorously after the recent plunge in us stocks, which helped to push up the value of the yen against the dollar.

"We forecast that we could not totally rely only on the American economy," on which to base Japan's recovery, Heizo Takenaka said on a talk show on the TV Asahi network.

"As such, it is very important to attach concrete policies to our second-stage basic policy for reforms." Japan's January-March gross domestic product grew 1.4 percent from the previous quarter, with roughly half of that due to external demand focusing on the United States, and half due to domestic demand, AFP quoted Takenaka as saying.

While emphasizing the basic strength of the U.S. recovery had not changed, the minister stressed it was crucial that Japan rely on reforms to boost its growth.

"When I said (in May) that the Japanese economy had hit bottom, I said there were a number of risk factors and one of them was the American economy," he said.

"The expectations of the American economy are too high. From a Japanese perspective, the result is the appreciation of the yen.

"We are seeing the existence of those risks clearly now," he said.

Closing out the first half of 2002, the Dow Jones industrial average is down 7.8 percent, the Standard and Poor's 500 down 13.8 percent, and the NASDAQ down 25 percent -- the worst first-half performance in its history.

Meanwhile, the yen has gained some 8.8 percent against the dollar since the beginning of the year, and was at 119.61 in late New York trade on Friday.

On Thursday at the Group of Eight summit in Canada, Japanese Prime Minister Junichiro Koizumi said the Japanese economy was defying gloomy predictions and bottoming out under his reform drive, which, he pledged, would not waver. 01-05