The Japanese economy is no longer on a recovery path because of the impact of the devastating earthquake on March 11, but the economy minister held out optimism it will pick up by the end of the year.
"Although the Japanese economy was picking up, it has shown weakness recently due to the influence of the Great East Japan Earthquake," the Cabinet Office said in its report for April, released Wednesday, marking the first downgrade of its economic assessment in six months.
A Cabinet Office official said that although Japan hadn't fallen into a recession, the country's economic recovery has clearly stalled. The recovery "is now a thing of the past," he said.
But Economy Minister Kaoru Yosano said he hoped the impact of the disaster will be in the short term, and that the economy will begin to recover by the end of the year.
Many economists see the economy picking up toward the end of the year, Mr. Yosano told a news conference. "I hope that will be the case," he said, adding that the biggest risk facing the economy is power supply shortages.
Many power plants were damaged by the quake and the tsunami, and electricity supply in affected areas is expected to fall well short of demand, especially in the summer.
The magnitude 9.0 quake and subsequent tsunami also damaged production facilities across the north of the country and put stress on the country's supply chains, while the continuing nuclear crisis at the crippled Fukushima Daiichi power plant has worsened business and consumer sentiment.
Auto sales in Japan plunged by 37.2% from a year earlier in March, in a sign of both the disruption to production and weak spending following the quake, the official said.
While Mr. Yosano said the supply chain will likely be restored in a few months, and the rebuilding of areas devastated by the quake could take several years, he didn't know how long the effect of the nuclear crisis would last.
"I can't figure out the nuclear plant issue," he said.
On Tuesday, the government upgraded the crisis level of the accident from 5 to 7, the worst on an international scale—matched only by the 1986 Chernobyl disaster.
To support areas devastated by the quake, which has left more than 27,000 people dead or missing, the government will draw up an extra budget, the report said. It didn't give details, but ruling party officials have said they are looking to craft a ¥4 trillion ($47 billion) budget.
On Japan's economic outlook, the report said that once production is restored, the economy is likely to pick up. But it also highlighted risks, including power shortages.
Economists have painted a bleak picture for the economy in the short term. A survey of 43 economists showed Tuesday that on average, they expect the economy to contract 2.83% on an annualized basis in the April to June quarter compared with the previous year. For this fiscal year ending March 2012, they see meager growth of 0.44%, the poll compiled by the Economic Planning Association showed.
Source: http://online.wsj.com
"Although the Japanese economy was picking up, it has shown weakness recently due to the influence of the Great East Japan Earthquake," the Cabinet Office said in its report for April, released Wednesday, marking the first downgrade of its economic assessment in six months.
A Cabinet Office official said that although Japan hadn't fallen into a recession, the country's economic recovery has clearly stalled. The recovery "is now a thing of the past," he said.
But Economy Minister Kaoru Yosano said he hoped the impact of the disaster will be in the short term, and that the economy will begin to recover by the end of the year.
Many economists see the economy picking up toward the end of the year, Mr. Yosano told a news conference. "I hope that will be the case," he said, adding that the biggest risk facing the economy is power supply shortages.
Many power plants were damaged by the quake and the tsunami, and electricity supply in affected areas is expected to fall well short of demand, especially in the summer.
The magnitude 9.0 quake and subsequent tsunami also damaged production facilities across the north of the country and put stress on the country's supply chains, while the continuing nuclear crisis at the crippled Fukushima Daiichi power plant has worsened business and consumer sentiment.
Auto sales in Japan plunged by 37.2% from a year earlier in March, in a sign of both the disruption to production and weak spending following the quake, the official said.
While Mr. Yosano said the supply chain will likely be restored in a few months, and the rebuilding of areas devastated by the quake could take several years, he didn't know how long the effect of the nuclear crisis would last.
"I can't figure out the nuclear plant issue," he said.
On Tuesday, the government upgraded the crisis level of the accident from 5 to 7, the worst on an international scale—matched only by the 1986 Chernobyl disaster.
To support areas devastated by the quake, which has left more than 27,000 people dead or missing, the government will draw up an extra budget, the report said. It didn't give details, but ruling party officials have said they are looking to craft a ¥4 trillion ($47 billion) budget.
On Japan's economic outlook, the report said that once production is restored, the economy is likely to pick up. But it also highlighted risks, including power shortages.
Economists have painted a bleak picture for the economy in the short term. A survey of 43 economists showed Tuesday that on average, they expect the economy to contract 2.83% on an annualized basis in the April to June quarter compared with the previous year. For this fiscal year ending March 2012, they see meager growth of 0.44%, the poll compiled by the Economic Planning Association showed.
Source: http://online.wsj.com
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