Japan's IT market had overcome the negative impact of the global financial crisis and was poised for another year of positive growth, but it now may be heading for a double dip this year after being hit by the Great Eastern Japan Earthquake in March, says a forecast by market intelligence company IDC.
IDC said Japan's IT market is expected to reach JPY12.0165 trillion in 2011, with negative 4.5% year-over-year growth. It added all of Japan's IT market segments -- IT services, packaged software, and hardware -- are expected to experience negative when compared to 2010.
The forcast also represented a substantial decline from JPY12.5879 trillion and year-over-year growth of 2.9% in 2010. Japan's 2011 IT market was previously forecast (in February 2011) to be JPY12.6172 trillion with 0.6% year-over-year growth.
The forecast highlighted that the central government, local governments, and corporations will prioritise their recovery efforts and postpone non-essential IT spending.
Moreover, the prospect of another period of economic stagnation is hurting corporate and consumer confidence, leading to a decline in capital expenditure and consumption, and to IT expenditure freezes.
The disaster has also disrupted supply chains in many industries. Although every effort is being made to restore production levels, there are supply shortages of certain components and materials.
The converged mobile devices (like smartphones) will be impacted and the research firm said that Japan's IT market is being constrained not only by declining demand but also by limited components supply.
However, IDC forecasts that Japan's economy will improve in 2012, buoyed by restoration demand and overseas demand from the US and emerging markets.
Overall IT spending will increase with the economic rebound and is forecast to reach JPY12.4327 trillion in 2012, with a year-over-year growth of 3.5% as it bounces back from the 2011 decline.
IDC said a key to the recovery will be to resolve the power supply issues in eastern Japan in the mid- to long-term. Smart meters, smart grid networks, HEMS (Home Energy Management System) and the like are being promoted as ways to resolve some of these issues.
IDC Japan IT spending group director Hideo Wada said IT vendors will be expected to play an active role in developing and promoting smart grids, HEMS, and the like, based on cloud technologies.