Japan today upgraded its economic assessment for the first time in four months amid recoveries in earthquake-hit supply chains following the March 11 disasters.
In its monthly economic report for June, the Cabinet Office said conditions in Japan 'remain severe due to the March 11 earthquake' but that 'some upward movements are also seen'.
The assessment comes two months after the government downgraded its view in April and suggests supply and production constraints following the earthquake and tsunami are easing.
While exports remain weak - Japan in May posted its second-worst trade deficit since records began as exports fell on the impact of the earthquake and tsunami, data showed today - the rate of export decline is seen to be slowing.
'The economy is expected to resume picking up as progress is being made in restoring the supply chains,' the report said. Industrial output rose a seasonally adjusted 1% in April from the previous month, led by a recovery in general and electrical machinery output.
The disaster left 23,000 people dead or missing and destroyed entire towns along Japan's northeastern coast, while triggering an atomic emergency at the Fukushima Daiichi nuclear plant, plunging the nation into its worst post-War crisis.
The disaster damaged factories, shattered crucial component supply chains and led to power shortages that hobbled industrial output. Major firms such as Sony and Toyota were forced to shutter plants.
A recovery in the supply chain is helping to fuel a pick up in output, suggesting the economy is bouncing back more quickly than initially thought.
But Japan cut its outlook on the global and US economies for the first time in 28 months in the view that a slowdown abroad could pressure the Japanese economy. Overseas demand was expected to drive Japan's recovery before the disaster.
It also cut its view on Asian economies due to a rise in crude oil prices.
Moody's cuts Japan's TEPCO to junk status
Ratings agency Moody's today downgraded TEPCO, the operator of Japan's stricken Fukushima nuclear plant, to below investment grade, warning the rating was on review for further possible action.
The Japan unit of the major US credit rating firm said it downgraded Tokyo Electric Power's senior secured debt rating to Ba2 from Baa2 and its long-term issuer rating to B1 from Baa3.
'The latest downgrade reflects further escalation of costs and damages from the continuing Fukushima nuclear plant disaster and increased concern that government support measures may not completely protect creditors from losses,' Moody's said.
The ratings agency cited the fact that since its last rating action in May, TEPCO has disclosed that damage to the reactors at the Fukushima Daiichi nuclear plant was far worse than first stated with core meltdowns occurring hours after the March 11 tsunami crippled cooling systems.
The power company also faces huge costs in compensation. Tens of thousands of people remain evacuated from homes, farms and businesses in a 20 kilometre zone around the radiation-spewing plant, with evacuation pockets also further afield.
'Moreover, the areas contaminated by radiation have been much more than previous estimates. And total costs will continue to rise until the reactors are brought into a state of safe cold shut-down, and which is not expected until 2012,' Moody's said.
'The magnitude of likely damages, including compensation liability, has risen to a level that is beyond TEPCO's ability to finance without government support,' it added.
Japan's government last week put forward a bill to ensure that the utility can pay compensation to tens of thousands affected by the nuclear accident. The bill calls for the creation of a body to handle claims made against TEPCO and will be funded by public money as well as contributions from power companies.
Analysts say its passage in parliament will be difficult and is likely to partly depend on whether the government can win over those opposed to it by enforcing tough restructuring on TEPCO.
