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Japan may be looking at a sharp contraction in economic output in Q II

May 11/2011

(ICIS) -- Japan may be looking at a sharp contraction in economic output in the second quarter, which will reflect the extent of the damage wrought by the 11 March disasters, analysts said on Tuesday. Its power supply problem has just been aggravated with the countrys third biggest electricity operator, Chubu Electric Power, agreeing to a government request to shut its Hamaoka nuclear plant for safety reasons.

The Bank of Japan pointed to high uncertainty about the possible effects of the earthquake disaster on Japans economy, in the minutes of early April monetary policy meeting that was released on Monday.

The Japanese economy may shrink by as much as 5% on a year-on-year basis in the June quarter as implementation of rolling blackouts in the aftermath of the 9.0-quake and tsunami in March has hit industries hard, said Gregory See, a Singapore-based economist at research firm Forecast.

The countrys automotive manufacturers halted production for weeks after the disasters and are currently operating at reduced capacities. The same is true for some petrochemical facilities in the quake-hit areas.

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