Japan quake impact seen deep and long, recession likely

(Reuters) - Japan’s already weak economy faces deeper damage than initially thought from the triple blow of a devastating earthquake, tsunami and nuclear disaster, and risks prolonging its sluggish recovery.

At worst, forecasts from some economists suggest the world’s third largest economy is in danger of slipping back into recession.

The hit to growth from Japan’s worst crisis since World War 2 is likely to exceed that of the 1995 Kobe earthquake, when industrial output fell but overall output remained strong, analysts said -- a downgrade from their first estimates after Japan was hit on Friday by its largest earthquake on record.

This time the yen is stronger, hampering exports, and Japan’s debts -- twice the size of the $5 trillion economy -- are much bigger. It also faces a major power problem.

Rolling power blackouts begin on Monday, which will lower production. Car and semiconductor factories and oil refineries in the north-east region are closed. And Japan may raise taxes to pay for relief work, reducing consumer spending.

“We now expect the Japanese economy to take longer than we expected to exit its current soft patch owing to the earthquake and tsunami,” Nomura analysts Takahide Kiuchi and Okazaki Kohei wrote in a note to clients.

Nomura expects the economy, which shrank late last year, won’t shake off its lull until the third or fourth quarter.

In contrast, some analysts initially had seen a return to growth in the April to June period.

Nissan Motor halted output at all its four domestic assembly factories and said restarting them could depend on whether it can get parts, one of many companies unsure of how quickly they can get their plants back up and running.

Power supply also is critical factor in estimating the loss to the nation’s productive capacity. Nuclear power plants are offline, and officials are grappling to control the damage and radiation leakage. Ward McCarthy, chief economist at Jefferies in New York, called this development troubling. “It just increases uncertainty at a time when uncertainty is already high,” he said.

“If power production output is damaged in a sustainable fashion, that could have a durable impact,” said Michala Marcussen, head of global economics at Societe Generale.

Japan quake-hit region to suffer $171 bln econ loss - Credit Suisse

(Reuters) - Economic losses in the regions of Japan that were hit by a massive earthquake will reach around 14 trillion yen to 15 trillion yen ($171-$183 billion) based on information available on Monday, Credit Suisse said in a research note.

Credit Suisse chief economist Hiromichi Shirakawa said economic losses from the quake-hit region of northeastern Japan would likely be “slightly less than 40 percent” of the 40 trillion yen in total economic losses seen from the Kobe earthquake in 1995.

Shirakawa said losses from the quake on Friday would likely be smaller due to the lower number of office buildings, commercial facilities and highways in the affected regions.

He also said there had been no reports of big collapses of major manufacturing facilities.