Chiefs of the Bank of Japan's local branches discuss the economic situations in their jurisdictions at a meeting held in Tokyo. (Toru Hatanaka)The Bank of Japan painted a gloomier picture of local economies in much of the nation in a report released Monday, citing widespread and significant economic damage caused by the March 11 earthquake and tsunami.
In its Regional Economic Report, or the Sakura Report, for April, the central bank revised down its assessment for economic conditions in seven of the nine regions.
As for the Tohoku region, whose coastal areas were devastated by the Great East Japan Earthquake, the BOJ report, the bank's first economic diagnosis since the disaster, said its local economy had been "damaged significantly."
The economic situation in the neighboring Kanto-Koshinetsu region, which includes the Tokyo metropolitan area, is "severe," according to the quarterly report.
The BOJ kept its economic assessment for Kinki unchanged from the evaluations in the previous report released in January. But it revised its assessment upward for the Shikoku region.
At the central bank's quarterly meeting of local branch chiefs that compiled the report, BOJ Governor Masaaki Shirakawa pointed to "strong downward pressure" on the nation's economy, especially in terms of production. Shirakawa's remarks reflected the central bank's fear that disrupted production could cause the nation's economic health to deteriorate.
In its previous Sakura Report in January, the bank said the economy in the Tohoku region was "picking up as a whole." Referring to the assessment that the Tohoku region's economy had been "damaged significantly," a BOJ official said the bank used an unusually strong expression to acknowledge the dire economic situation there.
At a Monday news conference, Kazuo Fukuda, general manager of the BOJ's Sendai Branch, said, in the Tohoku region's coastal areas, "Houses, factories, roads and all other facilities have been lost. Many elements of the region's production and sales infrastructure have disappeared."
"Even companies that have the will to rebuild their operations can't see how they can do it," he added.
All over the Tohoku region, an acute gasoline shortage is making it difficult for consumers to go shopping, crimping consumer spending, according to the report. The disaster has also delivered a heavy blow to the region's tourist industry.
Local financial institutions have also suffered major damage. Of the 936 branches of banks and other financial institutions in the region, 128 were forced to stop operations, at least temporarily. Only 59 have resumed operations, with many operating in makeshift facilities.
As one bright spot in the otherwise dismal economic picture of the region, the report pointed to the "fast pace" at which recovery work is progressing in inland areas.
There are more manufacturing facilities and distribution hubs inland than in coastal areas of the region. The BOJ predicts production and distribution in inland areas will recover from the damage, sooner or later.
The economic repercussions from the calamity are also being felt in other parts of the nation.
In the Kanto-Koshinetsu region, part of its coastal areas has been battered much like those in the Tohoku region. In addition, "cautious consumer sentiment" that has spread since the disaster is also dragging down the economy, the report said.
"Supply chain disruptions" are the main factor behind the central bank's downgrading of its economic assessments for so many regions, including those that have not been directly damaged by the quake and tsunami. Hardest hit is the auto industry.
In the central Tokai region, where Toyota Motor Corp. is headquartered, industrial output, especially in the auto manufacturing sector, appears to be falling sharply, the report said.
Difficulty in purchasing auto parts is also causing sharp drops in capacity utilization rates at car manufacturing plants in the Chugoku and Kyushu-Okinawa regions, according to the report.
The effects of the disaster are also dampening employment. Due to production cuts forced by the quake, some nonregular workers in the Kanto-Koshinetsu region have been involuntarily furloughed, the report pointed out.
Discussing the economic outlook for the coming months in his speech at the Monday branch manager meeting, Shirakawa reiterated that the economy will return to a path of moderate recovery as production starts picking up.
But it seems to be too early to make an accurate estimate of the range and magnitude of the effects the disaster will have on the economy.
(This article was written by Toru Hatanaka and Takashi Kamiguri.)
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