Japan Predicts Largest Contraction of Economy Since End of WWII *When It Lay In Ruins

http://www.nytimes.com/2009/04/28/business/global/28yen.html?hpw

Japan Predicts 3.3% Contraction

By BETTINA WASSENER
Published: April 27, 2009

HONG KONG — Bowing to what has long appeared inevitable, Japan on Monday lowered its growth forecast, projecting a 3.3 percent contraction for the fiscal year that began April 1.

The revision, from a previous projection of zero growth for the same period, brings the official forecast into line with what many analysts have believed for some time as the world’s second-largest economy battles its worst recession since World War II.

The government on Monday also estimated that Japan’s economy shrank 3.1 percent during the year that ended in March, rather than the 0.8 percent it had previously forecast, while the International Monetary Fund last week estimated Japan’s economy will shrink 6.2 percent in 2009, rather than by the 2.6 percent it had forecast in January.

The Bank of Japan, the country’s central bank, is expected to announce a similar revision on Thursday, when it publishes its twice-yearly economic report. But it is expected to leave interest rates at their already ultra-low levels and forgo other policy initiatives for the time being as it assesses the state of the economy, analysts said.

Battered by imploding exports as overseas demand evaporated late last year, and by persistently weak domestic demand, Japan is among the world’s worst-performing developed economies.

Acknowledging the severe headwinds Japan faces, Finance Minister Kaoru Yosano warned on Monday that “we need to think about things on the assumption that economic conditions will remain very severe,” Bloomberg News reported.

A string of government stimulus measures has helped ease the pain somewhat, but is unlikely to haul the country out of recession any time soon. And although trade figures for March, released last week, raised hopes that export figures may at least have stabilized, they have done so at levels about half where they were a year earlier.

Highlighting the difficult environment that Japanese companies face, Elpida Memory, the country’s largest computer-memory chipmaker, said in a preliminary statement ahead of its full results on May 12 that it had a net loss of $1.9 billion in the year that ended March 31. Also on Monday, Mitsubishi Motor and Sharp Corp., known for its LCD televisions, reported net losses of $566 million and $3 billion, respectively, for the year. Both companies surprised analysts by forecasting a return to profit in the current financial year, but like others across Japan, they have had to cut costs and reduce output amid dwindling demand.
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