Japan government downgrades outlook for economic growth
It said key areas of the economy, including industrial production and exports, would suffer.
It marks the first time in six months that the government has downgraded its assessment.
On Monday, the International Monetary Fund (IMF) cut its forecast for Japanese growth.
“The economy is showing weakness recently due to the influence of the Great East Japan earthquake,” the Japanese government said in its monthly economic report.
The damage caused to the Fukushima Daiichi nuclear plant has seen a shortfall of power supplies in Japan.
That has resulted in rolling blackouts, affecting production at some of the country’s biggest companies.
The government has warned of the negative impact of the power shortage.
It has cut its assessment of the country’s exports, saying shipments may decline as manufacturers battle to get their production lines back to full capacity.
The Japanese economy had already been struggling to come out of the global financial crisis before the earthquake and tsunami hit the north-east coast.
Analysts say the twin natural disasters have set back that recovery process even further.
“The condition of the economy is no longer flat or at a standstill, but rather the direction is downward,” said Shigeru Sugihara, director of macroeconomic analysts at the cabinet office.
Japan’s problems have been made worse by the uncertainty surrounding the developments at the Fukushima Daiichi nuclear plant.
On Tuesday, Japan’s Nuclear and Industrial Safety Agency raised the severity of the crisis at the plant to the highest level, seven.
This level was previously applied to the 1986 Chernobyl disaster in Ukraine.
The move prompted fears that the situation at the Japanese plant may be worsening.
However, Japan’s Prime Minister Naoto Kan has sought to allay fears.
“Step by step, the reactors in the Fukushima Daiichi power plant are moving toward stability.” Mr Kan said.
“People should not fall into an extreme self-restraint mood. They should live life as normal,” he added.