Harder times for Japan
Standard and Poor's Ratings Services and Asian Development Bank have revised down Japan's economic growth forecast for this year, due mainly to the poor recovery after the quakes.
Standard & Poor's said in a report published today that Japan's post-quake economic recovery is likely to fall short of its previous expectations. The rating firm expects Japan to post only 1.2 per cent gross domestic product (GDP) growth in the second half of 2011, bringing full-year GDP close to 0 per cent, against previous forecast of 1.3 per cent.
Meanwhile, ADB revised downward the 2011 forecast for Japan from 1.5 per cent growth to minus 0.5 per cent.
While Standard & Poor's expects Japan's economic growth to pick up in 2012, at 2.3 per cent, ADB forecasted the 2.8 per cent growth rate against previous projection of 1.8 per cent.
"Japan's economy has shown some signs of recovery after the Great East Japan Earthquake and tsunami in March and the ensuing nuclear crisis. However, several factors appear to have hamstrung the recovery, including the government's slow policy response to the disaster. Delays in government programs have hampered reconstruction efforts in disaster-hit areas, business and industrial sectors continue to struggle with power shortages, and the government made an about-face in its energy policy by saying it would consider halting use of nuclear power, although Yoshihiko Noda, the new prime minister, has said the country would aim for a more gradual phase-out to reduce the shock to the economy," Standard & Poor's said in the report.
Meanwhile, uncertainty over the global economy and the looming risk of a double-dip recession in the US have overshadowed a rebound in Japanese exports. The yen's sharp appreciation against major currencies may also undermine Japan's recovery.
"As a result, we see the rebound in the second half of 2011 as likely to be less robust than our earlier expectations," it added.
