The government in its monthly report released in mid-April downgraded its basic assessment of the Japanese economy for the first time in six months. It said the March 11 catastrophe is causing downward pressure on exports, production and consumption.

Although there is a view that the economy will start to pick up around July, partly assisted by increased demand linked to reconstruction projects, this may be too optimistic.

The March 11 earthquake and tsunami devastated infrastructure and manufacturing facilities in northeastern Japan and disrupted nationwide supply chains of goods.

Difficulties in stably securing electronic and other parts has pushed the production level of Japan’s auto industry down to around 50 percent of the level that prevailed before March 11.

Japan’s exports grew a seasonably adjusted 2.7 percent in February. But the calamity’s negative effects on exports in March are clear. The Finance Ministry said April 20 that the exports in March dipped 2.2 percent from a year before and that Japan’s trade surplus plummeted 78.9 percent from the same month the previous year. Since the March 11 disasters, consumers are not in a mood to buy as before, thus causing consumer spending to shrink.

In addition to the physical damage to production facilities caused by the disasters, the power shortage caused by the accidents at Tokyo Electric Power Co.’s Fukushima No. 1 nuclear power plant is hampering enterprises’ production activities. Agriculture and fisheries are suffering from radioactive contamination fears due to the nuclear crisis.

The same fears have even led some countries to restrict imports of manufactured goods from Japan.

Although Tepco has started work under its road map for actions to mitigate the Fukushima nuclear crisis, there is no guarantee that the situation will improve as the road map depicts. Politicians, citizens and enterprises need to give full play to their ingenuity to put the economy on a path of recovery.

The ruling and opposition parties must cooperate to quickly pass a supplementary budget for fiscal 2011 to provide funds needed for reconstruction projects.

(The Japan Times, April 28)