The reconstruction of the Japanese economy after tsunami, earthquake and nuclear reactor leaks is one of the biggest challenges faced by the Japanese government. After the natural catastrophe, the third-largest economy has seen a record decline in its factory output numbers in March.

It was the biggest drop since 1953, analysts say, surpassing the bad quotes expected. Production’s numbers plummeted 15.3 per cent in March from February. At the same time, household expenses fell about 8.5 %, compared to last year.

The Japanese economy is expected to grow 0.6% in 2011, according to sources from the Bank of Japan, which also foresees interest rates to be very close to zero. The previous economy growth forecast from the Bank was 1.6%.

Although the production figures are being described as overwhelming by many specialists, there’s still hope. Economy minister Kaoru Yosano believes the supply chain could recover sooner than expected due to Japanese company’s restless efforts.

One month ago, when asked about the effects the earthquake and tsunami would bring to the Japanese economy, Mr Yosano said the impact would be small.

In March this year, large areas of northeastern Japan were devastated by the earthquake and tsunami. Warehouses and factories were destroyed, collapsing industrial supply chains.