The International Monetary Fund expects a short-term slowdown for Japan, but growth would return to pre-quake levels and more, says an AFP report published by ChannelNews Asia.
But the IMF warns that power shortages may complicate recovery prospects. "The uncertainties from the nuclear situation and the power interruptions could weigh on the recovery by disrupting production across the country, and by weighing on corporate and household sentiment," says Ken Kang, the IMF's Asia Pacific division chief.
Tokyo has put the rebuilding cost of the March 11 earthquake at $309 billion. Kang says that Japan's government is fiscally fit enough to handle the recovery costs, and boosting spending to rebuild the country would have no long-term impact on the country's fiscal standing.
"We view Japan as having a relatively ample pool of savings that it can finance its own reconstruction needs," adds Mahmoud Pradhan, the IMF Japan mission chief.
The two IMF officials downplayed the disaster's effect on the global economy, but they said there could be disruptions to the "supply chain" for certain industries that depend on Japanese-made inputs, says the AFP.
Grim Earnings Prospects
Meanwhile, many Japanese corporations, such as technology giant Hitachi Ltd. and department-store retailer Isetan Mitsukoshi Holdings Ltd., are bracing for a big crunch in earnings following the devastating earthquake, a growing number of companies are cutting or even omitting dividend payments for the fiscal year ending in March, reports the Wall Street Journal.
"Electricity shortages will have an undeniable impact on the Japanese economy and on corporate earnings, while supply chain problems…may pose an even larger risk over the short term," say Nomura analysts in a recent report obtained by the Journal.
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