TOKYO (MNI) – The Japanese government on Wednesday revised down its
overall economic assessment for the first time since October 2010,
pointing to weak consumer spending, exports and production in the wake
of the March 11 disaster.

“Although the economy was picking up, it shows weakness recently,
due to impact of the Great East Japan Earthquake,” the government said
its monthly economic report for April.

In March it said, “Although the economy is turning to pick up, it
is only weakly self-sustaining, and the impact of the quake is
concerning.”

Shigeru Sugihara, director of macroeconomic analysis at the Cabinet
Office, told reporters that the economy is “clearly headed downward”
based on economic data and anecdotal evidence gleaned through informal
surveys.

But he said, “We have not yet judged that the economy has entered
a downturn phase.”

In today’s report, the government revised down its assessment of
personal consumption, exports and production, due largely to the negative
impact of the powerful earthquake and tsunami, which has sparked the
worst nuclear radiation crisis since the 1986 Chernobyl meltdown.

“Although consumption was showing movement of picking up, some
weakness is seen recently,” it said.

New vehicle sales in Japan fell at the fastest pace in nearly 37
years in March as the March 11 earthquake wrecked production facilities,
distribution networks and power plants in northeastern Japan, according
to data released by the Japan Automobile Dealers Association.

New vehicle sales tumbled 37.0% from a year earlier to 279,389 last
month, the seventh straight month of a year-on-year decline, following a
14.3% drop in February.

Month on month, Cabinet Office data showed that automobile sales
plunged 25.0% in March, compared with +3.8% in February and +10.4% in
January.

The government also said, “Although exports were showing movement
of picking up, a decline is a worry.”

Exports for the second 10 days of March fell 5.9% y/y, compared
with +14.8% for the first 10 days of the month, according to an estimate
by the Cabinet Office.

“Industrial production was picking up, but production activity is
stagnant,” the government said.

Production data for March is not yet available but auto output,
which accounts for about 15% of overall production, has been pushed down
significantly due to the supply chain breakdown and power restrictions,
according to informal surveys conducted by the Cabinet Office.

The nuclear crisis will also hamper economic activity by
restricting power supply from the quake-hit Fukushima Daiichi power
plant and contaminating farm and marine products, Sugihara said.

On Tuesday, the government raised the severity level of the nuclear
crisis at the Fukushima Daiichi nuclear power plant to the highest
category of 7 from 5.

Looking ahead, the government said, “As for short-term prospects,
weakness will continue for a while.”

The government’s Economy Watchers’ Survey index for current
economic conditions, a leading indicator for economic growth, tumbled to
27.7 in March from 48.4 in February, hitting the lowest level since 19.4
in February 2009 when the economy was down during the global recession.

But the government added, “Afterwards, however, as production
activities will be recovering, the economy is expected to resume picking
up, reflecting improvement in overseas economies and the effects of
various policy measures.”

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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