Later today and tomorrow we will get a very good idea of the damage done to the Japanese economy by the March 11 quake and tsunami and then the Fukushima nuclear crisis which remains unresolved.
Data for March for industrial production, retail sales, employment and inflation will be released and examined closely to gauge the impact from the earthquake.
The Bank of Japan also meets tomorrow and is expected to leave monetary policy unchanged, and to release updated forecasts for the economy. They won’t be good.
In fact Bank of Japan Governor, Masaaki Shirakawa gave a hint of the bank’s forecasts in an interview last Friday in which he acknowledged the possibility of a contraction in the first half of the year.
"We are now expecting production and GDP will decline in the first quarter and the second quarter," Mr. Shirakawa said.
While the latest figures will give us an initial idea, in a month’s time the April figures will tell us more about the severity of the impact.
On Wednesday, Japan’s core consumer-price index is expected to show a slight fall compared with the same month last year.
The inflation figures will be of interest. For much of the past several years Japan has been in the grip of intense price deflation.
There are suggestions the recent rises in oil and other commodities prices will produce a small amount of inflation.
A small dose of inflation, if sustained, could help the economy escape the deflating grip of price falls.
But some analysts are uncertain because Japanese companies are reluctant to pass on higher costs, as they already fear worried consumers are spending less after the March 11 earthquake and tsunami (as some sales reports for cars and beer have already suggested).
On top of this, Japanese consumers and business are shutting down spending and investment in an act of national solidarity (common at times of big crises in Japan), which will counter the impact of higher commodity prices and could allow deflation to continue.
The jobless data might not yet show the full impact of the disasters but could rise from February’s 4.6%.
Industrial output is sure to show a drop, after trade data for March showed that Japan’s exports fell 2% in the month (while imports were up nearly 12%). That was a faster fall than forecast by the market.
Car giants Honda and Mazda will both report tomorrow and their comments will provide us with the latest thinking on when they see the car industry returning to normal.
Already Honda has echoed Toyota’s forecast (which reports on May 11) that it won’t return to normal production levels until December.
Honda raised its net-profit outlook in February, due to rising sales in Southeast Asia, China and North America, will reveal the impact of a very sharp fall in car sales in March.
Japan’s leading automakers said on Monday that domestic production plunged more than 60% in some cases in March after quake and tsunami, which shut off parts supplies and led to power cuts and plant closures.
Sales of cars, trucks and buses, excluding minicars, fell 37% from a year earlier to 279,389 vehicles in March.
Japanese domestic output slumped to 129,491 vehicles, which Kyodo News agency said was the lowest since records began in January 1976.
Toyota, the world’s biggest automaker said production in Japan plunged 62.7% year-on-year in March.
Toyota’s worldwide production fell 30% to 542,465 vehicles in the month, while output at its Daihatsu and Hino subsidiaries was also sharply lower.
Nissan said production in Japan fell 52% in March due to the effects of the quake and the termination of a government subsidy program for environmentally-friendly vehicles.
But its global output for the month rose 9%.
The domestic picture was similar at Honda Motor, which reported output plunged 62.9% year-on year-in March while worldwide total production was down 19%.
Mazda announced a 53.6% in domestic production, with global production down 33.8%.
Mitsubishi Motor said its Japan production in March fell 25% to 49,434. Global production slipped 10.9% to 106,229.
On Thursday the Organization for Economic Cooperation and Development forecast that Japan’s GDP will slow to 0.8% through calendar 2011 because of the earthquake and tsunami.
The March 11 disaster brought massive economic problems to the Asian country, the OECD said in a report citing Japan’s official damage estimates of between 3.3% and 5.2% of GDP.
"In addition to the usual risks related to the strength of world trade, exchange rates and commodity prices, there is great uncertainty about developments in Japan, including the duration of electricity shortages," the report added. "Consequently, the timing and strength of an economic rebound is exceptionally difficult to forecast."
The damage to capital stock, electricity shortages and the disruption of supply chains were projected to significantly reduce output in the second quarter of 2011, the OECD forecast.
But despite that fall, the OECD maintained a positive outlook for Japan’s recovery, predicting that the following active reconstruction activity will boost economic growth to an annual rate of 2.3% in 2012
"Output is expected to rebound sharply from the third quarter of 2011, driven by reconstruction-related fixed investment," including public investment, business investment and residential investment, the report said.
