World News Engine: Japan seen heading into recession: survey

Japan seen heading into recession: survey

The economic fallout from Japan's biggest ever recorded earthquake, a tsunami and a nuclear crisis will push the nation into recession in the coming months, a survey of economists said Tuesday.

The triple disaster has lanced business confidence, reduced exports and discouraged consumer spending, the Nikkei business newspaper said after reviewing analysis from 11 major private economic institutions.

Recovery is not expected until the July-September quarter, the Nikkei said.

On average, the world's number three economy was seen shrinking 0.6 per cent in the January-March quarter from the previous three months, it said
.

For the following three months to June, the economy was seen contracting 2.6 per cent on average, with the most pessimistic economist expecting a 7.1 per cent drop, the daily said.

"Most believe that personal consumption and exports will fall (in April-June) from the previous quarter," the Nikkei said.

The Japanese economy shrank 0.3 per cent in October-December 2010, according to the Cabinet Office. A recession is commonly defined as two consecutive quarters of contraction.

Exports of automobiles and IT products are seen falling especially sharply due to decreased production, according to SMBC Nikko Securities Inc., the Nikkei said. Power shortages and supply chain disruptions have hit production.

Before the March natural disaster, economists believed the Japanese economy was going to enjoy a moderate upswing in the January-March quarter, as exports were likely to be lifted by a gradual rebound of the global economy.

Almost all of the economists said the economy will start to grow again in the July-September quarter on public works spending in response to reconstruction demand and a recovery in exports.

They project that the economy will expand 1.2 per cent in the July-September quarter and 5.6 per cent the following quarter, the Nikkei said.

Japan has said the cost of the March 11 earthquake and tsunami could hit 25 trillion yen ($297 billion).

The total cost from collapsed or damaged houses, factories and infrastructure such as roads and bridges is estimated at 16-25 trillion yen over the next three fiscal years, according to the Cabinet Office.

The estimate does not account for wider issues such as how radiation from the stricken Fukushima nuclear plant will affect food and water supply, amid an ongoing food scare.

The upper estimate would put the disaster's financial impact at more than double the 9.6 trillion yen of the 1995 Kobe earthquake, which killed more than 6,400 people.

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