The September 11th attack
Japan's malaise intensifies as exports to U.S. fall
| • | Retailers' survival may rest on whether Japanese come back |
Bloomberg News Service
TOKYO — Japan's economic outlook has worsened and companies have suffered a "considerable" drop in confidence, the government said last week in its first assessment of the effects of last month's terrorist attacks on the U.S.
Japan's largest export market is probably in recession, adding to woes at home that include record unemployment, declining factory production and falling consumer spending. Daihatsu Motor Co. and Fuji Photo Film Co. are among companies saying sales may suffer.
"The attacks first dampen U.S. consumer confidence, then their spending. That starts to hit Japanese exports," said Koji Shimamoto, chief strategist at BNP Paribas Securities Japan Ltd. "The attacks will harm the Japanese economy," and the effects will continue to be felt into next year, he said.
While repeating last month's line that the economy "continues to deteriorate," senior Cabinet Office official Haruhito Arai said the government has lowered its assessment of the economy from last month. "The economy's performance has dropped," he told reporters.
Reports the past two weeks showed manufacturers were trimming production before the Sept. 11 attacks on New York and Washington, the jobless rate held at a record 5 percent in August and business confidence posted its biggest decline in 3 1/2 years last quarter.
The world's second-biggest economy shrank 0.8 percent in the second quarter, and probably contracted again last quarter, meeting the definition of recession.
"With Japan's exports already dented significantly, we have to say the timing of a recovery has been pushed back further," Arai said. "Now, our biggest concern is spending in the U.S," which buys about 40 percent of Japan's exports.
Japan's exports were shrinking well before the attack, falling 6.2 percent in the three months ended June 30 from the previous quarter. Fuji Photo, the second-largest maker of photography film, last week said digital camera sales will fall short of expectations, raising concern it will miss its earnings forecast.
Daihatsu Motor Chairman Iichi Shingu said sales at Japan's second-biggest minicar maker may suffer as a result of the U.S. attacks. Shingu said there will probably be an "indirect impact to consumers' purchasing sentiment" after the attacks and the full impact may be clearer next month.
The government said it was concerned consumer spending, which accounts for about 55 percent of the economy, may slow. Sales of household electrical appliances, including personal computers, dropped 20 percent in August. Sales of new autos fell 14 percent in September.
Government and central bank officials have expressed concern about a drop in auto sales because that would hit makers of steel, glass, chemicals and parts used in cars.
The effects of the attacks will probably shave 0.2 percentage points from Japan's gross domestic product this fiscal year, mainly from the drop in exports to the U.S., according to Sumitomo Life Research Institute.
The think-tank expects the economy to shrink 1.1 percent this fiscal year, more than the 0.6 percent decline it forecast in June.
