The Economic Planning Agency on Monday reckoned that the downward trend in Tokyo stock prices might not have a negative impact on the overall economy.

"It is highly possible that downward pressure on the overall economy stemming from downturns in stock prices is not strong," the EPA said in its annual review of the Japanese economy.

However, "it is necessary to continue to pay close attention to possible effects of the movements of stock prices on the economy."

The benchmark 225-issue Nikkei Stock Average sank below the 14,000 level on Wednesday for the first time in 21 months.

Although the benchmark sharply rebounded by a hefty 504.53 points to 13,931.61 on Monday, it still remained below 14,000.

Independent economists point out that slides on Wall Street exacerbate weak economic fundamentals in Japan.

The EPA says falls in Tokyo stock prices are due to plunges in the high-tech based U.S. Nasdaq composite index, the downside risks of corporate earnings and the unwinding of cross-held stocks by major companies.

The EPA also reckoned that the declines will not have a serious impact on companies' earnings or restructuring plans as their main businesses, according to the EPA, are likely to remain strong.

The agency also said sluggish stock prices would not have a negative impact on the household sector because the average ratio of stockholdings to total household assets is very low.

Meanwhile, the agency said corporate activity was strong in 2000, primarily led by the information technology sector.

Personal consumption remained weak, however, and the employment situation remained severe.

Consumer sentiment is not improving as people feel uncertain about the future. Low personal consumption is contributing to the slow pace of recovery, the agency said.