Recession grips Japan's economy

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.