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Japan slides back into recession after quake

Last Updated 19 May 2011, 02:35 IST

The economy shrank by an annualised 3.7 percent in the first three months of the year, marking the second consecutive quarter of contraction, which is seen as a technical recession.

The fall was much more severe than the 2.0 percent drop forecast in a Dow Jones Newswires poll of analysts and was the first successive contraction since the 2008 financial crisis.

It was the steepest slippage since a record 18.3 percent contraction in January March 2009.

Gross domestic product fell 0.9 percent on a quarter-to-quarter basis, government data showed.

The 9.0 magnitude earthquake and a devastating tsunami has left nearly 25,000 dead or missing, and with a subsequent emergency at the Fukushima Daiichi nuclear plant has plunged Japan into its worst post-war crisis.

Many analysts see the downturn getting worse in April-June, as unresolved nationwide supply chain problems in the wake of the disaster continue to disrupt production.

Many component manufacturers are based in the worst-hit regions of Japan, their facilities damaged by the earthquake or inundated by the giant wave that followed.

Power shortages also threaten the economy, and while initial fears of a supply-demand imbalance going into the summer months have eased slightly, the situation is seen to remain volatile.

Before Japan was hit by its biggest recorded earthquake and the ensuing tsunami, some analysts had predicted that the nation's economy would return to growth in the first quarter on the back of rising overseas demand.

In the aftermath of the disasters, output, activity and spending plunged while consumer and business confidence took a tumble. Consumers have held off on non-essential spending such as entertainment and travel.

Analysts say however that GDP should start to grow again in the third quarter as initial earthquake-related disruption is overcome and reconstruction spending starts to boost the official figures.


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(Published 19 May 2011, 02:35 IST)

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