Japan's economy is already showing signs of recovering from a slump that followed a devastating earthquake in March, Bank of Japan Governor Masaaki Shirakawa said on Wednesday while stressing that the central bank would remain vigilant about economic risks.

Shirakawa was speaking after data showed Japanese exports tumbled in April, adding to the evidence of destruction from the triple blow of a 9.0 magnitude earthquake, deadly tsunami and a nuclear crisis, but also providing some signs that the world's third largest economy could be bottoming out.

It might not be a V-shaped recovery but there is a good chance we will feel a stronger sense of a recovery in the latter half of the current business year, the central banker told a seminar.

He also said some companies are pushing forward plans to fix supply chain disruptions, and consumers appeared less cautious about spending than they were immediately after the quake.

The immediate damage to economic activity and sentiment proved bigger than initially thought, knocking Japan back into recession for the second time in less than three years and prompting calls from some economists for central bank to follow up its monetary easing shortly after the quake with more action.

A 12.5 percent annual drop in exports reinforced the view that Japan was heading for a third straight quarter of economic contraction in April-June. But analysts pointed out that the decline was slowing and manufacturers were restoring production, showing the economy could resume growth later in the year, in line with the central bank's scenario, meaning it would refrain from more policy easing.

If you look at the month-on-month decline in exports, it is slowing. Carmakers are likely to be able to increase production soon, so when compared to the previous month, exports could bottom out in May, said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

The recovery in production and exports is likely to proceed in line with the Bank of Japan's thinking, so this may not factor much into a change in policy, Mitsubishi UFJ's Tonouchi said.


Shirakawa repeated the central bank would focus on risks to the economy for the time being, signaling readiness to loosen policy further if the damage from the quake proves bigger than expected. But by stressing that the current slump primarily reflected supply constraints, which monetary policy cannot solve, and reminding how the post-quake easing sought to shore up confidence, Shirakawa signaled the central bank right now saw no need to relax policy further.

Minutes of the BOJ's April 28 meeting, released on Wednesday, showed that besides Deputy Governor Kiyohiko Nishimura who called for further policy easing via an increase in the central bank's asset buying plan, one more board member saw a growing need for more action. But Nishimura, who was outvoted by eight to one, did not repeat the proposal at the latest meeting last week.

The fall in exports broadly matched forecasts and followed a 2.3 percent drop in March. In seasonally adjusted month-on-month terms, exports fell 5.5 percent in April after an 8.3 percent drop in March.

Imports rose 8.9 percent in the year to April, less than forecast, suggesting that reconstruction spending has not yet kicked in as much as expected while domestic demand remained weak.

As a result of depressed industrial activity Japan's crude import volume plunged 14 percent in April from a year earlier in its sharpest fall since October 2009.

Japan's trade balance swung into a deficit for the first time in three months and the April gap was the first April drop since 1980, when Japan was hit by the oil crisis.

Shipments to China declined an annual 6.8 percent, the first annual drop since October 2009, while shipments to the United States fell 23.3 percent.

(Writing by Tetsushi Kajimoto; Editing by Tomasz Janowski)