Hillman also reiterated that the huge 2.2 percent contraction in exports logged in March compared to a year earlier also far exceeded median expectations and said that the ambiguous nature of governmental endeavors to address the nation's economic regression, though a temporary one, were frustrating not just for the public who stand to shoulder the fiscal burden, but global markets reliant on Japan who are becoming tired of speculative monetary spin doctoring.

"The government needs to make it crystal clear how it's going to fund its reconstruction packages as public spending increases and revenue declines due to the impact of the disasters on the economy," said Hillman. "Public debt stands to rise 5.8 percent to 12.28 trillion U.S. dollars in the year started April 1, conservative rebuilding costs are now in the region of 611 billion U.S. dollars and the OECD (Organization for Economic Cooperation and Development) are on the government's case to double sales tax to 10 percent," he added.

Hillman went on to say that the central bank will not and can not underwrite government debt and the sooner the government realize that the March 11 disasters will be the costliest the world has ever seen, surpassing Hurricane Katrina in 2005 and the Kobe earthquake here in 1995 and detail cohesive measures to counter the economic impact, the better for Japan and the broader global economy.

"Plunging exports, factory production, retail sales, corporate and consumer consumer sentiment and falling wages, as the latest government data has indicated, cannot be glossed over with rhetoric or window dressed and has broad implications for Japan's immediate and future economic situation which is not inextricable from the broader global community," Hillman said.

Damage control

The Bank of Japan (BOJ) last Thursday slashed its economic forecast for fiscal 2011 saying it now expects a 0.6 percent growth in real gross domestic product for the fiscal year that started April 1, from a previous projection of 1.6 percent made in January, citing supply chain disruptions nationwide, following the quake and tsunami that have also had an adverse affect on global supplies from Japan to overseas markets, as contributing to the gloomy outlook.

But the BOJ also said that following strong downward pressure facing the nation in the first half of fiscal 2011, the economy is set to show signs of recovery in the latter half and upgraded economic growth for the fiscal year starting on April 1, 2012, to 2.9 percent from a previous forecast in January for a 2.0 percent expansion, citing reconstruction efforts sparking an increase in domestic demand.

Leading economists agree that economic growth will benefit longer term once reconstruction efforts swing into full gear, but some have suggested that due to diminished power supply caused by damaged power plants, including the Fukushima No. 1 plant, which has been central to one of the world's worst nuclear disasters, all of Japan's blue chip corporations including Sony Corp and Toyota Motor Corp. will suffer inimical losses.

Nomura Holdings Inc. has estimated that Japan's blue-chips stand to lose 17 billion U.S. dollars in lost profits alone due to power supply constraints in this financial year, with shortages from Tokyo Electric Power and Tohoku Electric Power accounting for service areas in which companies produce half of all of Japan's economic activity. In addition, independent polls have suggested that for the second quarter of the year, median forecast are for the economy to contract by 1.4 percent, debunking the central bank's upbeat assessment. "When you look at the scenario in its totality, it is not inconceivable and in fact those of us hedging on the side of caution would not be surprised if the economy contracts for two successive quarters by a similar amount," Hillman said. "Being that this could erase nearly 160 billion U.S. dollars off the economy, prime minister Kan need his best fiscal hawks to act quickly and decisively. The damage has already been done, henceforth it's about limiting the degree and length of economic downturn. It's about damage limitation, not one of Kan's strong points in my opinion," said Hillman.