Masaaki Shirakawa, the central bank's governor, said that while the earthquake would not bring down the country's already debt-ridden financial system, there was "strong downward pressure" on the economy.
The Nikkei 225 declined 0.5pc to 9,719.7 points on the lowest volume of trading in three months after Citigroup downgraded Japan's auto sector from "buy" to "sell". Toyota, Honda and Nissan all saw their shares fall more than 2pc in value. The Nikkei has fallen 6.4pc in the month since the earthquake struck.
The Bank of Japan also marked out the auto sector as an area of particular weakness, as it downgraded its economic forecasts for seven regions. "Cautious views about the economy have become widespread in many regions, mainly reflecting setbacks in production following the Great East Japan Earthquake," said the central bank's regional economic report for April.
The widespread weakness was "mainly due to damage to production facilities, supply-chain disruptions, and constraints on the use of electricity," the report added. In order to provide liquidity, the central bank has doubled the amount of its asset purchase funds to 10 trillion yen (�72bn) and is to launch an emergency 1 trillion yen cheap loan programme to support reconstruction.
Meanwhile, analysts are mulling the latest comments from Yukio Edano, the chief cabinet secretary, that the government would be able to finance the country's rebuilding without having to turn to the Bank of Japan to underwrite bonds. "There will be difficulties, but we believe we can secure enough funding without the Bank," he said.
Some politicians have called for the central bank to directly purchase bonds to fund reconstruction, but the government has so far been cagey about what plans it has to raise the funds. Estimates of the cost of reconstruction range from as low as 2 trillion yen to as high as 35 trillion. The government itself says more than 4 trillion will be needed.
However, Mr Edano's comments were taken as the clearest sign yet the Japanese government does not intend a large stimulus package for the economy.
"It's been a month since the disaster and the government still hasn't come out with anything [detailing the scope of the stimulus plan],' said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo. "The economy will remain in a very severe state for some time, and there's just so much uncertainty about the outlook. It's hard to see when we'll begin to see a meaningful rebound in growth.
No comments:
Post a Comment