Japan IT sector facing double-dip recession

Japan's IT market could be heading for a catastrophic double-dip recession this year as the effects of the recent earthquake become clear.

The International Data Corporation (IDC) released a forecast report which spells doom for the IT sector in Japan, as most organisations prioritise recovery efforts at the expense of IT spending.

Supply disruptions are already well documented, with IDC predicting that they will have a big impact on the smartphone market, which has so far been booming. Silicon wafer supply is in jeopardy and a number of firms have had to close fabrication plants, such as Freescale and Sharp.

The timing couldn't be worse, as consumer confidence was already badly shaken by the global recession, which took its toll on Japan's economy and the IT sector in particular. Just as things began to look up, Japan's IT market is facing another recession.

IDC predicts that Japan's IT market will shrink by 4.5 per cent this year as a result, bringing in just over 12 trillion yen. This is a big drop from 2010's 12.6 trillion yen, which was a 2.9 per cent increase over 2009, and it is substantially less than the 0.6 per cent growth otherwise expected this year.

However, IDC expects that strong demand will help Japan recover in 2012, when it will bring in 12.4 trillion yen, an increase of 3.5 per cent after this year's decline.

IDC said the key to recovery will be to fix power supply lines in the eastern part of Japan which was hit by the earthquake. It said that smart meters, smart grids and home energy mangement systems will be vital in this area.