Japan Says Economy in ‘Severe’ State, View Unchanged (Update1)
Keiko Ujikane
“The economy is worsening rapidly while in a severe situation,” the Cabinet Office said in a report for April released in Tokyo today. The government lowered its evaluation for business sentiment for the first time since December and upgraded its assessment of exports and public works.
Japan is heading for its worst postwar recession as a global slowdown erodes corporate profits, prompting job and wage cuts. Bank of Japan Governor Masaaki Shirakawa said today weaker spending by companies and consumers will prolong the slump even as exports and production start to recover.
“We’re seeing an ongoing deterioration in the corporate sector,” which is spreading to households, said Fumihira Nishizaki, director of economic analysis at the Cabinet Office. “The basic state of the economy hasn’t changed.”
The government cut its evaluation of business sentiment after the Bank of Japan’s Tankan survey showed that confidence at large manufacturers fell to a record low in March.
Finance Minister Kaoru Yosano said the economy hasn’t hit the bottom yet. Speaking to reporters today, Yosano also said an exchange rate of 100 yen per $1 was a stable rate.
Gross domestic product shrank at an annual 12.1 percent pace in the three months ended Dec. 31, the steepest drop since the 1974 oil crisis. The economy may have contracted 10.9 percent in the first quarter, according to the median forecast of 13 economists in a Bloomberg News survey.
Export Volumes
The government upgraded its assessment of public works for the first time since July 2002 because of additional spending on the projects allocated in the budget, the Cabinet Office said, adding that investment is still sluggish.
The Cabinet Office also raised its evaluation of exports after a report showed the pace of decline in volumes slowed. Shipments measured by volume declined a seasonally adjusted 2.2 percent in February from the previous month, slowing from a 14.4 percent drop in January, according to government data.
“Exports are decreasing substantially,” the government said in the report, after saying last month that they were decreasing “very substantially.”
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
Last Updated: April 17, 2009 06:47 EDT