By: Dr. Mike Campbell
As the impact of the March 11th earthquake and tsunami become clearer, Japan has posted the worst ever decline in industrial output. Industrial production fell by 15.3% from February to March – this is the worst performance recorded since 1953 when the data was first collected. The decline eclipsed the previous worst fall which was seen in February 2009 at the height of the global financial crisis and that was just 8.6%. The post tsunami figure was almost twice this figure and it was on the back of almost two unaffected working weeks in March. In absolute terms, the April figure is likely to be worse since many producers have exhausted their inventories of spare parts since the disaster struck – whether the figure is bleaker still on a month by month comparison remains to be seen.
The problem of the damage to the infrastructure and the limitation in the availability of components (which are often supplied on the “just in time” principle to avoid holding large stocks of parts) is exemplified by car maker Toyota. Toyota Motors has reported that its output fell by 63% in March. The company does not expect to return to full productivity before the end of the year.
The Bank of Japan has also slashed its prediction for growth for 2011 from 1.6% down to 0.6%, but as more data filters through, this may be revealed as an optimistic figure. The Dollar remains stubbornly weak against the Yen in light of its own problems and this affects the competitivity of Japan’s exports to the USA.