Japanese companies continue to count the cost
Private consumption is expected to remain subdued during 2011. Consumer confidence deteriorated in the wake of the disaster and problems with electricity supply have led some shops to cut their opening hours. Retail sales dropped sharply during March, falling by an annualised 8.5% as spending plummeted. The Organisation for Economic Co-operation & Development (OECD) expects economic output to fall sharply during the second quarter of 2011, after which it should rebound.
Many technology companies – including Sony and Panasonic – were forced to suspend production following the earthquake and tsunami. Although some of Toshiba’s subsidiaries halted production for a while following the disaster, the company said that the impact on its overall business performance was “relatively limited.”
Ratings agency Standard & Poor’s revised its outlook on six Japanese car manufacturers and suppliers – including Toyota, Honda and Nissan – from “stable” to “negative”. Having been badly affected by a shortage of components and disruptions to production in the wake of the earthquake and tsunami, the performance of Japanese automakers and suppliers is likely to deteriorate during 2011, heightening the risk that their market share could become permanently eroded in the longer term.
Toyota’s production in Japan fell by 63% during March, and the company cut or suspended production at its plants around the world. Toyota has experienced a delay in delivering its new “Prius a” model, but expects its output in Japan to return to 70% of capacity by June, which is earlier than initially expected. Meanwhile, Nissan reported record annual sales of 4.2 million vehicles. The company said that, although the earthquake had significantly disrupted its operations, Nissan had proved its “resilience in the face of adversity”.
Unsurprisingly, the disaster had a severely negative impact on exporting activity, and Japanese exports fell by 2.3% during March. According to the OECD, Asia accounts for 56% of Japanese exports. Intra-regional trading activity in Asia appears to have picked up – the question remains whether Japan can satisfy rising demand.
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