TOKYO (MNI) – The government said on Wednesday that Japan’s economy
is about to recover from what appeared to a temporary dip but also
warned that the deadly mix of the recent earthquake, tsunami and
radiation leaks from the quake-hit nuclear plant is feared to be hurting
the fragile recovery.

“Although the economy is beginning pick up, its self-sustainability
is weak and the influence of the Tohoku Pacific Earthquake is feared,”
the government said it in monthly economic report for March.

The report was originally scheduled for release last Friday, but
was postponed in the wake of the quake with a 9.0 magnitude and high
tsunami waves that wreaked havoc on Japan’s northeast Pacific coast on
March 11.

In February, the government said, “The economy shows signs toward
picking up and it is getting out of the pausing period.”

“The largest impact (of the quake) is that restricted power supply
may hit industrial production,” Economic and Fiscal Policy Minister
Kaoru Yosano told reporters after a cabinet meeting to discuss the
economic outlook and ways to rebuild the quake-hit areas.

“The impact of the radiation leaks on sentiment is troublesome,” he
said.

Earlier, Fumihira Nishizaki, director of macroeconomic analysis at
the Cabinet Office, told reporters that the economy was believed to be
picking up, based on the economic data and anecdotal evidence which were
available just before the earthquake.

“It is highly possible that industrial production will deviate
downward,” Nishizaki said. “There are no data at present to conclude
that the economy is not picking up any longer.”

As for short-term prospects, the government projected that “the
economy is expected to pick up, reflecting improvement in overseas
economies and the effects of various policy measures.”

“However, attention should be given to the influence of the Tohoku
Pacific Ocean Earthquake on the economy,” it said.

The downside risks that the government is watching for remain more
or less the same: “fluctuations in the financial and capital markets,
the influence of a rise in oil prices and movements in overseas
economies.”

The government repeated that there is still a risk of the influence
of deflation on the economy and a concern about a possible deterioration
of the employment situation.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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