Slowly the shape of the damage done to the Japanese economy by March 11 disasters is becoming more apparent.
While the impact is grim and the news from Fukushima still worrying, there are a few bright patches that tell us the economy hasn’t been completely stunned and that there’s some light in the tunnel.
We already know that the trade surplus for March fell sharply, as did industrial production and retail sales, while a host of companies from car makers to electronics giants have seen sales slump and profits evaporate, both in Japan and in other economies.
But car groups such as Toyota and Honda are reporting that their plants are increasing production as more scarce parts become plentiful.
But recovery will be slow and it could be the end of the year before both and some of their competitors are back to pre-March 11 levels.
For that reason seven major automakers have held off on releasing forecasts for the year ending March 2012.
But despite the fall in confidence and leading indicators, the government is still expecting industrial production to recover this month and in coming months and be at February levels late this year.
But a slump in the first and or second quarter GDP is still expected, which would put Japan in a technical recession.
Power companies and trading houses have moved to cover shortfalls and are reported to have bought up 5 million tonnes of fresh supplies of oil and gas to use in power stations in coming months to replace the power lost from the damaged nuclear power stations in Fukushima and the three at the Hamaoka plant that is now being shut down for safety reasons.
Bloomberg reckons that Tokyo Electric Power Co may have to increase imports of liquefied natural gas by 50% to compensate for output lost as a result of last month’s earthquake and tsunami.
The closure of 14% of the utility’s capacity will force it to boost foreign LNG purchases by 5 million to 10 million metric tonnes a year for the next three to five years, according to Bloomberg reports.
That could lift costs by an extra $US6 billion.
That will be good news for Australian energy companies on the North West Shelf of WA.
Japan is warning of a 15% power shortfall in summer because of the damage to Tepco’s power stations, but extra power will come from other networks and from lower consumption by companies and individuals.
For example car manufacturers are planning to work on Saturdays, and possibly weekends in summer when power demands are low and major companies are talking about working a four day week at the Tokyo head offices.
The government (supported by public opinion polls) has moved to half the expansion of the nuclear industry over the next 20 years (see separate story) and has already put together an initial $50 billion (4 trillion yen) emergency budget to meet the early costs of cleaning up and rebuilding along the quake and tsunami zone in the country’s northeast.
Consumer and business confidence continues to weaken.
Figures out this week show that Japan’s composite index of coincident economic indicators dropped 3.2 points to 103.6 in March, with the quake and tsunami blamed.
That was a record monthly fall and came despite the government’s overall assessment of the economy being relatively positive, saying it was improving, but that the index fell due to the March 11 quake.
The Cabinet Office said that the index of leading indicators, which projects the state of the economy several months in advance, also fell 4.5 points, its largest ever fall.
But worryingly, the country is now facing a slump in tax revenues, meaning the government will have to borrow more to maintain government services and pay for the rebuilding and the aid to Tokyo Electric Power.
The Nikkei business paper reported on Thursday that the Finance minister is looking at a shortfall of several trillion yen (or more than $A60 billion). The government has been looking for revenues of 41 trillion yen ($506 billion) for the year to March 31, 2012. The paper said that could fall to 38 trillion yen.
Japan’s debt hit a new record of 924 trillion yen, or over $US 11 trillion dollars, at the end of the country’s financial year on March 31.
That was up by around $US500 billion in a year.
The ministry expects the national debt to top $US12 trillion dollars by March of next year because of the fall in tax revenues and the extra spending for the rebuilding and Tepco compensation bills.
But while the debt is huge, it’s mostly domestic and internationally Japan is second only to China in international reserves, and is the world’s biggest creditor nation with the biggest inflow of financial services and investment income.
Figures out this week show the country’s foreign reserves were $US1.13 trillion at the end of April, up for a second month in a row.
That was $US19.52 billion dollars higher than at the end of March.
That means the country’s vast income from offshore has managed to offset the slide in export income that showed up in the trade surplus for that month and now the current account for the same month.
The current account surplus fell 34.23% in March (after the trade surplus fell 79%) to 1.67 trillion yen ($US20.7 billion) from March 2010.
The Finance Ministry said the sharp drop was due to impact of the March 11 disasters.
The current account surplus for the January-March quarter slid 24.8% to 3.78 trillion yen, with the surplus for all fiscal 2010 rising 0.9% to 15.9 trillion yen.
