Gov't estimates Jan 1 quake cut Japan growth by ¥115 bil

The government on Tuesday estimated that a deadly earthquake that hit central Japan on New Year's Day had a negative economic impact of up to 115.0 billion yen in the first quarter of 2024, equivalent to less than 0.1 percent of nominal gross domestic product.

The Cabinet Office released the figure as it maintained the overall assessment of the Japanese economy in its monthly report for April, saying that it is recovering "at a moderate pace, although it recently appears to be pausing." The same expression was used for the third straight month.

Economists say Japan's economy likely contracted in the January-March quarter, citing soft domestic demand, especially private consumption that accounts for more than half of GDP.

The Noto Peninsula earthquake in the three prefectures of Ishikawa, Niigata and Toyama on the Sea of Japan coast had a negative impact of 90 billion to 115.0 billion on GDP in the January-March quarter, according to the Cabinet Office.

Based on available data for the October-December quarter, the estimates translate into 0.06 percent to 0.08 percent of nominal GDP. The government will release GDP data for January-March in May.

In the report, the government retained its assessments of all key components of the economy, from private consumption and capital investment to production and exports.

Private consumption and exports appear to be "pausing for picking up," the report said. Business investment, however, "shows movements of picking up."

The report also noted that some manufacturers are "affected by the suspension of production and shipment by some automotive manufacturers," referring to a test data rigging scandal involving Toyota Motor Corp group firms.

The government warned that full attention should be paid to the situation in the Middle East and fluctuations in the financial and capital markets.

The yen's persistent weakness against the U.S. dollar and rising crude oil prices have raised concern about the prospect of higher import costs accelerating inflation.

Financial markets are seeking clues on the timing of the next interest rate hike by the Bank of Japan after it ended negative rates and its yield cap program in March, a major overhaul of unorthodox monetary easing steps.

The government "expects" the BOJ to achieve its 2 percent inflation target in a sustainable and stable manner by "conducting appropriate monetary policy management in light of economic activity, prices and financial conditions," the report said.