Japan's Economy Falters Due to the Massive March Quake

As for the current status in Japan, it needs time to revive again before the end of 2011, where the sustained recovery in manufacturing may take time as companies are facing a shortfall of engine spares which halted the production cycle.

The Japanese trade balance continued its contraction, and fell more than expected during the month of May, giving a negative sign about the economic recovery in Japan, while the economy is still faltering from the March quake and it faces problems that impede the recovery.

Japan's trade deficit widened to 853.7 billion yen in May, compared with the previous -463.7 billion yen in April, revised to -464.8 billion yen, while the analyst's expectations referred to -710.1 billion yen. 

Japan's adjusted merchandise trade balance declined to -474.6 billion yen during May, from -496.4 billion yen a month earlier, which was revised to -469.6 billion yen, which was better than analyst's expectations for -538.5 billion yen. 

Japan's exports slumped by 10.3% on the year compared with a previous decline of -12.5%, and expectations for -8.4%.Imports rose 12.3% on the year from 8.9%. 

The nation's exports (which is the main pillar for economic growth) slumped in the first quarter, affected by the quake that hit the economy, where the manufacturing sector in Japan, the most sector affected, dropped to the slowest pace in nine years in March.

Meanwhile, Japanese companies are suffering from the negative results caused by the March quake, where Honda Motor Co., the second largest car-maker in Japan and the world's biggest manufactures of motorcycles, warned that the company will record lower earnings during the fiscal year, as production was halted because of a shortage of engine spares.

On the other hand, the Bank of Japan introduced new stimulus for companies to revive the economy, where monetary policy makers decided to keep rates unchanged in one of government's efforts to support the economy exit from its hurdle phase, while they extended their assistance to companies suffering from the earthquake to help sustain the economy.

This move from the BOJ is positive support to promote the recovery during the second half of the year, and protect the world’s third-largest economy after data showed corporate confidence plunged and the yen’s advance against the dollar threatens a nation still reeling from the March 11 disaster.