STEVE CHIOTAKIS: The Japanese government reported today its economy shrank by an annual rate of 3.7 percent in the first three months of the year. And while aftermath of the recent earthquake and tsunami makes up less than a month of the quarter, the natural disasters are playing a huge role in the contraction.
The BBC’s Roland Beurk is with us from Tokyo with the latest. Hi Roland.
ROLAND BEURK: Hi Steve.
CHIOTAKIS: Obviously, the earthquake wreaked a lot of havoc on the country but it’s been in recession three times now in the past decade. How was the economy doing without the disaster.
BEURK: Well it was actually clawing back. It was getting better, but the earthquake and the tsunami destroyed factories, it snapped supply chains. It crippled production in the country. It made consumers even in places that weren’t affected cut back because they were so shocked by the catastrophe. And in fact consumers spending fell in March at its steepest rate on record. So it’s all added up to Japan having too cautious declining economy going back into recession.
CHIOTAKIS: Roland, does the Japanese government have the wherewithal to pull itself out of recession? I mean, it’s already poured so much money into the economy anyway, right?
BEURK: Well certainly it’s going to cost a lot to rebuild in the northeast. That’s money that has to be spent. As you say, Japan does already have a massive public debt. But that spending is going to have to happen. That should help the economy to recover towards the end of the year. The problem is going be over the next few months because the disaster at the Fukushima nuclear plant means there’s likely to be electricity shortages over the summer. And that of course could hamper production too.
CHIOTAKIS: All right the BBC’s Roland Buerk joining us from Tokyo. Roland thanks.
BEURK: Thanks very much.
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