The Bank of Japan has downgraded its assessment of the country's economy for the fifth month in a row. The central bank says the grim outlook is partly due to the September 11 terrorist attacks in the United States.
Japan's ailing economy continues to falter according to the most recent monthly report from the country's central bank.
The Bank of Japan's October report, released Monday, says that industrial production is declining considerably hurting employment and consumer confidence.
Some economists say the bleak assessment is a clear indication that the Japanese economy, which is the world's second largest, is falling into recession.
Analyst Marshall Gittler of the Bank of America says that falling orders for technology-related items is a major worry for Japanese companies, including the biggest exporters in the nation, such as Sony and NEC. "The major source of growth in the Japanese economy in the past several years has been the manufacturing of information technology equipment, mostly for export," he said. "With that market falling, there is no source of growth left in the economy."
The report also notes that the terrorist attacks of September 11 further hurt exports to the United States, which is Japan's top trading partner.
Mr. Gittler says that a U.S. recovery is unlikely before the third quarter of next year, and warns that a prolonged war on terrorism could further delay a pick-up in the economy. "It has heightened the uncertainty for the U.S. economy," said Marshall Gittler. "A lot of Japan's exports go to the United States, something like 30 percent. So in so far as it increases the uncertainty for the Japanese export industry, it increases the uncertainty for the Japanese economy."
Underscoring the fragile state of the economy here is a report from a private Japanese institute showing that corporate bankruptcies rose 4.4 percent in September from one year ago, with debts of bankrupt firms tripling to $26 billion.