The Bank of Japan has slashed its forecast for Japan's economic growth this fiscal year due to the earthquake, but said the economy will get back on track as early as autumn.
The Bank of Japan has slashed its forecast for Japan's economic growth this fiscal year due to the earthquake, but said the economy will get back on track as early as autumn.
In its Outlook for Economic Activity and Prices report released April 28, the central bank lowered its gross domestic product forecast for fiscal 2011 to a 0.6 percent growth from the previous fiscal year, down from its January projection of 1.6 percent.
"The economy for the time being is likely to continue facing strong downward pressure, mainly on the production side," the semi-annual report said.
Governor Masaaki Shirakawa said the economy could fare worse than the BOJ projection.
"For the time being, we need to be on alert for downside risks to the economy, particularly fallout from the earthquake," Shirakawa told a news conference after a BOJ Policy Board meeting April 28.
Still, the BOJ report maintained its pre-quake economic outlook, saying, "Japan's economy is expected to return to a sustainable growth path with price stability in the longer run."
BOJ officials said parts supply networks will recover and electricity shortage will ease around autumn.
The BOJ actually raised its GDP forecast for fiscal 2012 to a 2.9 percent growth from the previous fiscal year, up from its January projection of 2.0 percent.
Statistics showed that the March 11 Great East Japan Earthquake dealt a serious blow to economic activities.
The index of industrial production, a leading index of the economy, fell a record 15.3 percent in March from the previous month, according to a preliminary report.
"This is quite a shocking figure," Kaoru Yosano, minister in charge of economic and fiscal policy, said.
The previous largest drop was 8.6 percent recorded in February 2009 amid the global financial crisis.
The disaster hampered output nationwide. The areas outside the quake-hit region accounted for 80 percent of the decline in production.
Automakers and electronics manufacturers were forced to cut back on production after key parts suppliers in the Tohoku region were damaged.
"In the worst-case scenario, production will not return to normal levels until the year-end," said Fumihiko Ike, senior managing officer of Honda Motor Co.
Household spending fell 8.5 percent, the largest on record, in March from a year earlier in real terms.
The jobs situation took a sharp turn for the worse in the quake-hit region. In Iwate, Miyagi and Fukushima prefectures, about 70,000 people have applied for unemployment benefits since the earthquake.
Excluding figures for the three prefectures, the jobless rate was 4.6 percent in March, unchanged from the previous month.
The ratio of job offers to job seekers, also excluding the three prefectures, was 0.63, up 0.01 from the previous month.
Labor minister Ritsuo Hosokawa remains guarded, however.
"The effects of the earthquake were not reflected in the statistics for March. I'm afraid the figures for April will worsen," Hosokawa told a news conference on April 28.
In March, the number of new job offers, a leading indicator of the economy, fell 7.1 percent from the previous month. It was the second-largest decline on record.
The number dropped in 29 prefectures. In Iwate, Miyagi and Fukushima prefectures, the decline was more than 20 percent.