Japan downgraded its economic outlook for the first time in six months on Wednesday, citing a drop in production and consumer spending following the March 11 earthquake and tsunami.
The world's No. 3 economy has shown "weakness" and will remain sluggish for a while due to the fallout from the twin disasters and ensuing nuclear crisis, the Cabinet Office said in an April report.
The 9.0-magnitude earthquake and tsunami decimated much of northeastern Japan on March 11, killing up to 25,000 people. The tsunami also damaged a nuclear plant, setting off radiation leaks in a crisis on a par with the 1986 Chernobyl disaster.
The disasters destroyed many factories, crippling supply chains and causing severe parts shortages. Manufacturers including Toyota Motor Corp. and Sony Corp. were forced to suspend their output due to the supply crunch.
Japanese production and consumer spending in the post-quake economy were declining, the government said in the April report, which also voiced concern over a fall in corporate earnings in the coming months.
The April report gave a bleak view on Japan's economy. The government said in an earlier report in March that the economy was turning around. The March report was issued after the tsunami disaster, but at the time, the government said it did not fully grasp the depth of the destruction caused.
The government said it would quickly compile an extra budget to finance post-tsunami reconstruction efforts. It did not give the size of the budget, but local reports have said the budget could exceed 5 trillion yen ($59 billion).