JAPAN’S ECONOMY IN 2011

ANALYSIS: JAPAN HEADING BACK INTO RECESSION

Wayne Cole

Reuters, March 17, 2011

Japan's economy seems to be in a state of almost suspended animation as its nuclear crisis shows no sign of ending, sorely testing analysts' hopes for a swift rebound led by reconstruction efforts.

Indeed, with trillions of yen wiped off share markets and a surging yen currency squeezing the all-important export sector, economists fear an extended slump is inevitable.

"Japan will fall into a temporal recession," wrote Susumu Kato, Credit Agricole's chief economist for Japan in a note. He expects gross domestic product (GDP) to shrink this quarter and next, making three straight quarters of contraction.

He estimated the devastating earthquake and tsunami which struck last Friday would take 0.6 percentage points from gross domestic product (GDP) growth in the first quarter and as much as 1.5 percentage points in the second.

Kato expects first quarter real GDP to fall 0.4 percent from the previous quarter, and second quarter GDP to drop 1.2 percent.

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