Japan GDP to fall further than expected; swine flu poses threat

30 April 2009 11:33  [Source: ICIS news]

SINGAPORE (ICIS news)--The Bank of Japan (BOJ) forecast on Thursday that the country's gross domestic product (GDP) for the current fiscal year will shink by more than previously expected. 

The BOJ now predicted that output from the world's second-biggest economy would drop by 3.1% for the year ending March 2010. It had projected in January that the decline would be 2.0%.

“The outlook for Japan's economy from fiscal 2009 through fiscal 2010 is likely to greatly depend on developments in overseas economies and global financial markets,” the country’s central bank said in a report.

The first half of the fiscal year (to September 2009) would likely see domestic demand continuing to weaken. However, the decline in exports and production may start to ease, it said.

In March, the country’s industrial production rose for the first time in six months, showing growth of 1.6% from February, although it was still down 34.2% from year-ago levels, based on preliminary data released on Thursday by the Ministry of Economy, Trade and Industry (METI).

Industrial production had been badly hit as Japan’s exports of goods plummeted as the effects of the recession worsended for industrialised and developing economies, crimping global demand.

The outbreak of swine flu, primarily in Mexico, and its rapid spread to several other countries in the west could further affect the country’s export-oriented industries as it risks further limiting trade between Japan and its major western partners, according to analysts.

“Possible spreading of the new type of influenza and its influence on economic activity need to be monitored carefully,” the BOJ said in its report.

Japan’s trading industry will be immobilised if this goes on, with limited trading to only Asia,” said a Mizuho Securities analyst who declined to be named.

“But we are not certain if Asia will be protected from the influenza outbreak,” the analyst added.

Terence Teo contributed to this story
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