The dollar, which had already weakened before the assault, has fallen further, as investors become wary about the US as an investment destination. Unemployment has begun to rise significantly, and is likely to dampen consumer spending, which for the past year has been the main factor keeping economic growth afloat. In the aftermath of the terrorist assault the outlook for the economy, investor sentiment and market performance has all become much less clear. The US economy will probably weaken further in the short term, but the long-term outlook seems more favourable, as interest rate cuts begin to take effect. Inflationary pressures are not expected to be a threat in the short term as growth in the US slows.
Markets are likely to remain volatile.
Japan Recent Japanese economic data has been negative. Japanese GDP figures declined in the second quarter as expected, pushing its economy close to a recession. The government recently lowered its monthly evaluation of the economy, saying that it was sliding further into recession, as production, exports and investment had fallen and the jobless rate holds at a record high. The slowdown has been coupled with a strengthening yen although the central bank has been taking measures to reduce upward pressure on the currency. In the long term, sustainable growth depends on the recovery of consumer confidence and on continued corporate restructuring to make companies more efficient and profitable.