Japan Economy Expected To “Bounce Back”

Toyota, just one of many Japanese companies affected

Toyota, just one of many Japanese companies affected

Japan’s earthquake and tsunami on Friday has left parts of the country’s economy “frozen”, however analysts estimate that it will rebound later this year in the third quarter.

Some of Japan’s leading producers, including Toyota – the world’s biggest carmaker, have closed all of their plants across the country.

Analysts at Nomura expect that loss of production to dent the economy during this quarter and the next. However, they also forecasted that growth would return in the third quarter.

“This disaster has in effect temporarily frozen the world’s third largest economy,” said Richard Soultanian of NUS Consulting, which specialises in the energy supply industry.

This earthquake appears to have come at a very bad time for the Japanese economy, which is the third largest in the world. At the end of last year Japanese economy had shrunk but had been expected to return to growth in the second quarter of 2011. With the current situation, it would seem it will not return on its feet until the third quarter.

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

Sharon O’Halloran, a professor of political economy at Columbia University, questions whether the events will finally lift them out of their economic trouble or will it push them down even deeper?

The country’s global car giants are expected to be the worst affected.

Nomura analysts suggested that annual operating profits at Toyota, Honda and Nissan would be affected by between 3% and 8% this year.

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