"When everyone said the Japanese economy was bad three or four years ago, I wasn't that pessimistic, but now, when people say the economy is getting better, I don't really feel optimistic," Takenaka told a panel of the World Economic Forum for East Asia.

Japan's economy grew at an annualized 3.1 percent, revised first-quarter figures said this week, in the latest sign that Japan has snapped out of a decade of economic doldrums.

But Takenaka pointed to the fall since early April of share prices on the Tokyo Stock Exchange, contrasting it to bourses in other developed economies since last month.

"The falls seen in the United State and Europe were about seven or eight percent, but that of Japan was twice as large," he said. "The Japanese economy now has both good aspects, resulting from reforms, and bad aspects."

"The banking sector has become better, but I don't think the financial sector has followed the improvement," he added.

Japanese share prices posted their biggest fall earlier this week since the September 11, 2001 terrorist attacks, largely on concerns over the US economy, although they made up for the losses by Friday.

Many analysts say the turbulence is a natural reaction to a fast rise on the Tokyo market, which gained 40 percent in 2005.

Koizumi, who steps down in September, has been a staunch supporter of privatization, winning a landslide election victory last year campaigning on breaking up the post office's giant monopoly.