Outlook for the World's Third-Largest Economy Improves Despite the March Quake

The outlook for the Japanese economy has improved as retail sales came better than expected during May, which means that the world's third largest economy started to rebound in the second half of the year after the massive quake that hit the nation on March. 

Japan's retail trade seasonally adjusted rebounded to 2.4% in May, from the previous 4.1% during the month of April, while the actual reading came better than the analysts' expectations that referred to 1.2%. 

On the other side, annualized Japan's retail trade showed an actual -1.3% in May, better than both the previous reading of -4.8% and anticipations of -2.2%. 

Japanese large retailers' sales dropped by 2.4% during May, more than both previous and expected readings of -1.9%. 

However, the Bank of Japan raised the assessment for the economy this months saying "the economy is showing signs of recovery" after it was "stopped worsening" while Japanese companies are still seeking to increase their investment to exit from the consequences of the worst financial crisis, adding that the economic recovery in Japan is on the track. 

The Bank of Japan upgraded its monthly economic assessment for the first time since February, while the economy will return to a moderate recovery in the second half of the fiscal year through March 2012. As for the government's efforts, Mr. Shirakawa, governor of the Bank of Japan, and his board, decided to keep the benchmark interest rate to "virtually zero," a range of 0.0% to 0.10%, to support the economy to exit from its hurdle phase. 

Furthermore, the Japanese economy has witnessed some improvements after the March quake, where the industrial sector increased less than market expectations in April, adding the Japanese companies began their production process, signaling that the economic recovery will start its upside movement in the second half of 2011. 

From the BOJ view, the world’s third-largest economy will probably expand 3.4% in the year starting April 2012 as reconstruction projects will boost demand, after contracting a projected 0.3% this fiscal year.