Monday, March 14, 2011

Analysis: Quake impact seen deep and long, recession possible | Reuters

Japan's already weak economy faces deeper damage than initially thought from the triple blow of a devastating earthquake, tsunami and nuclear disaster, and risks prolonging its sluggish recovery.

At worst, forecasts from some economists suggest the world's third largest economy is in danger of slipping back into recession.

The hit to growth from Japan's worst crisis since World War 2 is likely to exceed that of the 1995 Kobe earthquake, when industrial output fell but overall output remained strong, analysts said -- a downgrade from their first estimates after Japan was hit on Friday by its largest earthquake on record.

This time the yen is stronger, hampering exports, and Japan's debts -- twice the size of the $5 trillion economy -- are much bigger. It also faces a major power problem.

Rolling power blackouts begin on Monday, which will lower production. Car and semiconductor factories and oil refineries in the north-east region are closed. And Japan may raise taxes to pay for relief work, reducing consumer spending.

No comments: