Effect of the earthquake was grave

Signs of recovery in Japan, debt remains a worry

GMT 10:08 2011 Tuesday ,31 May

Arab Today, arab today Signs of recovery in Japan, debt remains a worry

The twin disasters in March plunged Japan into its worst crisis since World War II

The twin disasters in March plunged Japan into its worst crisis since World War II Japan's economy showed signs of recovery Tuesday from its quake-tsunami disaster, but a failure to contain the industrialised world's biggest debt raised the prospect of a credit rating cut. Factory output rose 1.0 percent in April, data showed, against a record drop of 15.5 percent a month earlier as the March 11 disaster shattered supply chains and crippled power stations, including the Fukushima atomic plant.

The gain was lower than the 2.9 percent predicted in a poll of economists by Dow Jones Newswires and by the Nikkei financial daily, but analysts welcomed the news as a signal of a brighter outlook.
The effect of the earthquake was grave, said Japan Research Institute chief economist Hidehiko Fujii, but "the recovery trend as shown in forecasts is extremely strong. It is possible for production to be restored to pre-quake levels before summer."

The economy slipped back into recession in January-March, contracting sharply after the disasters left around 25,000 dead or missing and devastated infrastructure and manufacturing facilities, plunging the nation into its worst crisis since World War II.
Many key component manufacturers are based in the worst-hit regions and suffered damage to their facilities from the 9.0 magnitude earthquake or were inundated by the giant wave that followed.
Industrial behemoths such as Sony and Toyota were forced to halt some production.
But while fears of a major electricity shortfall going into the summer have eased slightly, the situation remains volatile, analysts warn.

Total domestic production of cars, trucks and buses plunged a record 60.1 percent year-on-year in April, according to the Japan Automobile Manufacturers Association, while exports fell 67.8 percent, another record.
"In April, the production of the auto sector did not recover as much as the market had expected. But there are many positive signals in the economic report," said Hiroshi Watanabe, economist at Daiwa Institute of Research.

The government forecast overall industrial output would rise 8.0 percent in May and 7.7 percent in June, with production in transport equipment expanding 35.7 percent in May and 36.7 percent in June.
"It was widely thought that the disruption in the supply chain would last until the July-September quarter, but if this trend of recovery continues, the supply chain may return to the pre-disaster state as early as June. I would say the prospect is pretty bright," Watanabe said.

Dampening the domestic outlook somewhat was data showing household spending fell 3.0 percent on year for the second straight month with consumers holding off on areas such as entertainment and travel.
Keiji Kanda, economist at the Daiwa Institute of Research, said: "The figures show that the levels of household earnings are lowering as a result of the stagnant economy and declining exports."
The government also said unemployment stood at 4.7 percent in April, up from 4.6 percent in March and matching expectations, although the figures exclude data from regions most hit by the twin disaster.

Japan auto output, exports plunge

Ratings agency Moody's said Tuesday it could lower Japan's sovereign debt rating in three months over fears it will fail to contain a debt mountain that is twice GDP, the industrialised world's largest.
"The review has been prompted by heightened concern that faltering economic growth prospects and a weak policy response would make more challenging the government's ability to fashion and achieve a credible deficit reduction target," Moody's said in a statement.
"Without an effective strategy, government debt will rise inexorably from a level which already is well above that of other advanced economies."
Moody's assigned a "negative" outlook in February on Japan's "Aa2" rating, which analysts said would probably lead to a downgrade.
"Although a (Japan government bond) funding crisis is unlikely in the near- to medium-term, pressures could build up over the longer term, and which should be taken into account in the rating, even at this high end of the scale," Moody's said.
The move will put further pressure on centre-left Prime Minister Naoto Kan, under fire for his handling of the response to the disaster and facing the threat of a no-confidence motion this week.

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