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Japan IT market to be headed for a double dip in 2011, says IDC

May 02, 2011 // Julien Happich

Japan IT market to be headed for a double dip in 2011, says IDC

Japan's IT market had overcome the negative impact of the global financial crisis and was expected to experience another year of positive growth, but it now looks to be headed for a double dip in 2011. According to a new International Data Corporation (IDC) forecast, the central government, local governments, and corporations will prioritize their recovery efforts and postpone non-essential IT spending.

Meanwhile, 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. Converged mobile devices (such as smartphones) will likely be impacted. IDC believes that Japan's IT market is being constrained not only by declining demand but also by limited components supply.

Accordingly, IDC now forecasts Japan’s IT market to reach 12.0165 trillion yen in 2011, with negative 4.5% year-over-year growth. All of Japan's IT market segments – IT services, packaged software, and hardware – are expected to experience negative when compared to 2010. The new forecast represents a substantial decline from 12.5879 trillion yen and year-over-year growth of 2.9% in 2010. Japan’s 2011 IT market was previously forecast (in February 2011) to be 12.6172 trillion yen with 0.6% year-over-year growth.

However, IDC forecasts that Japan’s economy will improve in 2012, buoyed by restoration demand and overseas demand from the U.S. and emerging markets. Overall IT spending will increase with the economic rebound and is forecast to reach 12.4327 trillion yen in 2012, enjoying a year-over-year growth of 3.5% as it bounces back from the 2011 decline.

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. "IT vendors will be expected to play an active role in developing and promoting smart grids, HEMS, and the like, based on cloud technologies," said Hideo Wada, Group Director of IDC Japan IT Spending/IT Services/Software & Security/Communications Group.

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