Japan Economy took bigger hit than estimated

The economy took a bigger hit from last month's disaster than anticipated, with factory output falling the most since at least the end of Allied Occupation, underscoring calls for the Bank of Japan to add stimulus.

Factory output dropped a record 15.3 percent from February and household spending plunged 8.5 percent from a year earlier, government reports showed Thursday. Retail sales fell the most in 13 years, according to data released the previous day.

The economy's deterioration makes harder Prime Minister Naoto Kan's task of sustaining confidence in government debt after Standard & Poor's on Wednesday downgraded its outlook for the nation's rating.

The BOJ was expected to detail an emergency lending program later in the day for banks in the devastated Tohoku region as a group of lawmakers and former Cabinet ministers presses for more purchases of government bonds.

"Plunges in output and exports will weaken consumer spending and that may prompt discussions for more stimulus," said Masayuki Kichikawa, chief economist at Bank of America-Merrill Lynch in Tokyo. "The Bank of Japan will be compelled to consider adding more stimulus around the middle of the year." (read more)