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Rediff.com  » Business » Recession grips Japan's economy

Recession grips Japan's economy

Last updated on: May 20, 2011 14:25 IST

Image: Damaged Nippon Steel's facility (L) and a cargo ship swept by ashore by Tsunami.
Photographs: Reuters.

Japan's economy has derailed again. On March 11, a massive earthquake and tsunami shattered the world's third largest economy.

Japan is also facing the world's worst nuclear disaster since Chernobyl. The country has officially declared a recession after a fall in GDP in the January-March quarter.

Recession grips Japan's economy

Image: TEPCO President M Shimizu (C) and company officials (wearing blue jackets) bow infront of residents.
Photographs: Reuters.
It is the third recession the economy faces this decade. Japan's real GDP for the January-March quarter fell 0.9 per cent compared to the previous quarter, an annualised rate of 3.7 per cent.

After a record 18.3 per cent fall in January-March 2009, this has been the biggest drop in economic growth.

Recession grips Japan's economy

Image: A man looks at Chubu Electric Power's Hamaoka Nuclear Power Station in Omaezaki.
Photographs: Issei Kato/Reuters.
The worst affected prefectures contribute only about 4 per cent of GDP.

Japanese exports fell in March by 2.2 percent to $71.09 billion, year-on-year.

With mounting nationwide supply chain problems, power outages, the crisis is expected to worsen further. The nation's GDP during the April-June period will fall further.

Recession grips Japan's economy

Image: A man walks past insurance company Meiji Yasuda Life in Tokyo.
Photographs: Reuters.
The recovery will be slow despite efforts to return to normalcy. However, the Bank of Japan (BOJ) expects the economy to be on track in the second half of the year.

It is estimated up to 10,000 hectares of arable land in north-east Japan have been affected by the tsunami.

Production in many of the component manufacturing units and automobile plants have come to a standstill.

Recession grips Japan's economy

Image: Containers are unloaded from a truck for export at Yokohama port in Yokohama.
Photographs: Yuriko Nakao/Reuters.
This has turned out to be the world's most expensive natural disaster with losses estimated at $300 billion.

Tokyo Electric Power Co (TEPCO) is set to see losses of $18 billion for the fiscal year ended March 2011. The nuclear crisis triggered by the disasters has wrecked more havoc.

Recession grips Japan's economy

Image: A Taipei City health official shows the media the radiation reading of Japanese imported apples.
Photographs: Reuters.
The radioactive contamination in food products have led to many countries like China, United States, European Union, Singapore and India banning food imports from Japan.

The Japan Automobile Manufacturers Association said its member firms will close their plants on Thursdays and Fridays and open them Saturdays and Sundays from July to September this year to cut down electricity consumption.

Recession grips Japan's economy

Image: A woman and her children ride on a bicycle past a ward office in Tokyo.
Photographs: Lee Jae-Won/Reuters.
Exporters are facing a slowdown. Consumer spending and business confidence has hit record lows after the crisis.

Japanese consumers have cut down luxury items and travel. Consumer spending fell 0.6 per cent in the January-March period.

Recession grips Japan's economy

Image: Nissan Motor Co's Juke cars are parked before being shipped to the U.S
Photographs: Reuters.
Auto exports fell by 27.8 percent in March, the largest drop since October 2009.

Meanwhile, Japanese automakers started discussions aimed at working out a strategy to revive the industry amid disruptions and power failures.

Toyota Motors said that the natural disaster cut its operating profit for the fiscal year $1.35 billion.

Recession grips Japan's economy

Image: A visitor is kissed by Disney character Mickey Mouse at Tokyo Disneyland.
Photographs: Nicky Loh/Reuters.
Supply problems in Japan have hit trade partners like the US, which source components from Japan.

US manufacturing output fell 0.4 per cent in April, as the automobile industry faced shortage due to a fall in supply from Japan.

Recession grips Japan's economy

Image: Sony's tsunami-crippled warehouse is seen near Sendai port.
Photographs: Kim Kyung-Hoon/Reuters.
The Japan Auto Parts Industries Association also plans to restore production and save electricity consumption.

Several industries have been asked to close manufacturing plants on week days.