Japan ups economic view

Japan yesterday upgraded its economic assessment for the first time in four months amid recoveries in earthquake-hit supply chains following the March 11 disasters.

In its monthly economic report for June, the Cabinet Office said conditions in Japan “remain severe due to the March 11 earthquake” but that “some upward movements are also seen.”

The assessment comes two months after the government downgraded its view in April and suggests supply and production constraints following the earthquake and tsunami are easing.

While exports remain weak – Japan in May posted its second-worst trade deficit since records began as exports fell on the impact of the earthquake and tsunami, data showed yesterday – the rate of export decline is seen to be slowing.

“The economy is expected to resume picking up as progress is being made in restoring the supply chains,” the report said.

Industrial output rose a seasonally adjusted one per cent in April from the previous month, led by a recovery in general and electrical machinery output.

The disaster left 23,000 people dead or missing and destroyed entire towns along Japan’s northeastern coast, while triggering an atomic emergency at the Fukushima Daiichi nuclear plant, plunging the nation into its worst post-War crisis. The disaster damaged factories, shattered crucial component supply chains and led to power shortages that hobbled industrial output. Major firms such as Sony and Toyota were forced to shutter plants.

A recovery in the supply chain is helping to fuel a pick up in output, suggesting the economy is bouncing back more quickly than initially thought.

But Japan cut its outlook on the global and US economies for the first time in 28 months in the view that a slowdown abroad could pressure the Japanese economy. Overseas demand was expected to drive Japan’s recovery before the disaster.

It also cut its view on Asian economies due to a rise in crude oil prices.