Japans economy at a standstill in March

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Japans economy at a standstill in March

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The weak pulse of Japan's economic recovery slowed again Friday.

27 April,2012 09:18 am

The mixed figures showed that Japan is struggling hard to achieve momentum.Household spending climbed, but at a slower than expected rate, while an apparently positive second straight month of on-year inflation was mostly because of higher energy costs.Unemployment remained static, but industrial production only managed a small rise, and projected figures showed the outlook for output over the coming months was much gloomier.The economy has been on a recovery track so far but we have to be quite cautious about its outlook, said Satoshi Osanai, economist at Daiwa Institute of Research.Factories turned out a disappointing 1.0 percent more goods in March from the previous month, the economy, trade and industry ministry said.The rise partially reversed a 1.6 percent fall in February but was slower than a jump of 2.4 percent the market had been anticipating.The ministry also said manufacturing companies expected a 1.0 percent rise in production in April would be dwarfed by the 4.1 percent shrivelling of output they were staring at the following month.What is worrying is the 4.1 percent (production) drop expected for May, Osanai said, adding the transport machinery sector -- including Japan s large automakers -- were a big contributor to the overall drop.It was the sector which had led production, aided by subsidies for eco-friendly cars and robust exports to the United States, he said. Now we see growing uncertainty.Osanai said demand for cars is expected to slow with the government using up funds for subsidies by late this year.The economy continues to be at a standstill, said Takeshi Minami, economist at Norinchukin Research Institute.Minami said the Japanese economy would likely only gather momentum once the global economy begins picking up, adding the worst-case scenario of Europe s debt crisis hurting emerging markets seemed to have been averted.But he noted looming power shortages in Japan could pour cold water over the positive trend.It could damage supply when exports and reconstruction demand are growing toward summer. There are risks of its putting a damper on the economy.Japanese power companies have warned a hot summer could bring blackouts for some areas unless nuclear plants are re-started.All but one of Japan s nuclear reactors are offline amid a lingering public distrust of the technology after last year s tsunami-sparked crisis at Fukushima. The only active one is due to be shut down on May 5.Figures from the internal affairs ministry showed unemployment in March stood still at 4.5 percent.The ministry also said household spending rose an inflation-adjusted 3.4 percent from a year earlier in March, slower than an average 4.0 percent growth that had been forecast.Japan s core consumer prices were up 0.2 percent on year, registering growth for the second consecutive month.But far from being a welcome sign of the return of inflation after years of stationary or slipping prices, the increase stemmed mainly from higher electricity bills and gasoline prices, reflecting globally increased energy prices.There is little change to the overall trend in that the positive contribution by energy-related consumption baskets is offset by a negative contribution by other consumption baskets, especially ones that include household electronics, said Yoshiro Sato from Credit Agricole bank.Overall, inflationary pressure is very benign.The central Bank of Japan is holding a policy meeting on Friday amid hopes that it will loosen its credit grip further in a bid to help ease the deflation that continues to grip the nation.