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Japan Recovery 'Paused' - Deficit Growing, Forecast Guarded

The Bank of Japan has announced the country's economic recovery has "paused" and its trade deficit is growing. The forecast is guarded.
By Chana Ya'ar
First Publish: 12/21/2011, 6:02 PM

At a time when the holidays should reflect some growth, the Bank of Japan has announced the country's economic recovery has "paused" and its trade deficit is growing. The forecast for next year is guarded, analysts say.

With a strong yen and a slowing global economy, the central bank decided not to change its interest rate, leaving it between zero and 0.1 percent.

Figures reflected a trade deficit in November for the second month in a row, with exports to the essential European market struck as the region was hit by a fiscal crisis.

Flooding in Thailand has also affected the economy, particularly in the manufacture of computer parts and video equipment. The country is also still struggling to recover from the effects of the massive earthquake and tsunami that hit northern Japan in March, followed by several typhoons that also struck the key Fukushima nuclear plant disabled along the coast.

The bank said in a statement Wednesday after a two-day policy meeting, "The pick-up in Japan's economic activity has paused, mainly due to the effects of a slowdown in overseas economies and of the appreciation of the yen.

"Improvement in business sentiment has slowed on the whole despite steady improvement in domestic demand-oriented sectors."

The current European financial crisis, warned the bank, adds an increased risk to the global outlook for 2012.

"The sovereign debt problem in Europe could result in weaker growth not only in the European economy but also in the global economy, particularly through its effects on global financial markets," the statement said.