According to this report from the BBC, the Japanese government has downgraded its assessment for the economy as a result of last month’s catastrophic earthquake, tsunami and nuclear plant accident.
Key areas of the economy, including industrial production and exports would suffer. Indeed, as a result of the nuclear accident, food exports are under threat.
This is the first time in 6 months that the Japanese government has downgraded its assessment.
At the same time the International Monetary Fund (IMF) cut its forecast of Japanese growth:
“The economy is showing weakness due to the influence of the Great East Japan earthquake” the Japanese government said in its monthly economic report. “It remains in a severe condition”.
The earthquake and tsunami had affected many companies with operations in the affected regions, destroying factories and blocking supply chains. The electricity shortages caused by the nuclear accident at Fukushima Daiichi power plant are likely to continue into summer. The government has therefore warned of a negative impact on exports, with shipping tipped to decline as manufacturers seek to bring their production lines back to full capacity.
Japan had been struggling to emerge from the impact of the global financial crisis but as a result of the earthquake and tsunami, as well as the aftershocks that have followed, the direction of the economy has been downward.