FIVE months after a tsunami and nuclear meltdown assailed Japan, the economy has been pummelled by fresh blows. Share prices have followed global stockmarkets down, with the Nikkei 225 index revisiting its nadir in the days after the earthquake in March. As if the fears about a global slowdown that have depressed equity investors were not enough, the yen has been soaring, which will hurt Japanese exporters. Adding to the pain, Moody’s, a credit-rating agency, downgraded Japan’s debt rating one notch to Aa3 on August 24th because of its huge public debt and chaotic politics.
Yet amid the gloom the outlook for a robust recovery has actually been brightening. Private economists are forecasting a boom in 2012 and 2013, as the rebuilding of the devastated Tohoku region in north-eastern Japan acts as a big stimulus, which will offset slower growth in America and Europe. Official estimates put the damage at between ¥16 trillion and ¥25 trillion ($210 billion-330 billion). The government has already budgeted for ¥6 trillion to pay for reconstruction, which has yet to kick in. An additional stimulus package, perhaps as large as ¥10 trillion, is being debated in the Japanese parliament. The surge in public spending means that Japan is almost certain to resume growth in the second half of this year.
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