虚拟币交易系统熊先生:Japan weighs economic implications of tsunami

Japan weighs economic implications of tsunami

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2011-3-12 15:23

Until Friday afternoon the biggest risks for Japan’s economic recovery were high oil prices, uncertain export demand and a looming budget showdown between the faltering government and an emboldened opposition.


The huge earthquake that hit off the coast of northeastern Miyagi prefecture was a harsh reminder of the more elemental dangers that can threaten economic activity on the crowded and seismically vulnerable Japanese archipelago.


Weighing the full implications of the natural disaster will take time. Officials and rescue services were on Friday still struggling to estimate the scale of the damage and casualties in the stricken areas.


Yet the earthquake at the very least throws a huge question mark over an economic recovery that economists had hoped would gather steam in the current quarter after stalling in the last three months of 2010.


The Japanese economy grew 3.9 per cent last year, it’s fastest performance in two decades. But output is still well below levels set before the global financial crisis and gross domestic product actually contracted 0.3 per cent in the last quarter compared with the previous three months.


Earthquakes often have less impact on major economies than initially expected, and the areas worst hit on Friday are far less economically significant than the coastal industry zones in the western region of Kansai, which suffered widespread stoppages after the 1995 Kobe earthquake.


The whole northeastern region of Tohoku accounts for about 8 per cent of the Japanese economy, compared with the 4 per cent generated by Kobe city, said Richard Jerram, chief Asia economist at Macquarie.


However, the disaster could heighten recent uncertainty among consumers and investors about the prospects for Japan’s continued recovery from its worst postwar recession. Growth remains highly reliant on demand from key markets such as the US, Europe and China, making the recovery already hostage to offshore fortunes.


“The [first concern is that] fragile economic cycle is not in a position to withstand significant disruption,” said Mr Jerram.


After witnessing construction cranes on a site near his Tokyo office block “bowing like trees in the storm”, Masaaki Kanno, economist at JPMorgan Securities Japan, dashed off a research note sketching out some immediate likely effects.


“It appears [that it] will take time before the whole transportation and distribution system starts working normally,” Mr Kanno said. “Business activities, especially in the Tohoku area will be damaged.”


Near-empty food shelves in some Tokyo convenience stores highlighted the likelihood of a short-term surge in consumer demand for food and essentials in the densely populated area around the capital, but the disaster could have a chilling effect on more discretionary spending such as tourism.


At least Japanese companies should be much better prepared for the inevitable disruption to supply chains than they were in 1995.


Learning from the lessons of that disaster, the government and insurance companies have been actively encouraging even smaller companies to draw up detailed “business continuity plans” intended to minimise losses and aid quick recoveries.


In the longer term, the earthquake is certain to force heavy spending on construction and public works in the affected region, with terrifying footage of tsunami carrying away whole buildings making clear that dealing with the damage will require huge effort and heavy investment.


By forcing households and businesses to dip into their savings to finance reconstruction, the disaster is likely to support economic growth in the later months of this year.


Japan’s construction sector has been badly squeezed by efforts by the ruling Democratic party to shift spending “from concrete to people”, cutting public works budgets in favour of child allowances and more generous welfare.


Much concrete will now be needed in the northeastern prefectures, providing a boost to hard-pressed contractors.


But the need to finance the public works in the affected areas will put further strain on the government budget, which is set to rely more on new bond issuance than taxes for revenue in fiscal 2011 for the third year in a row.


While the earthquake will surely ensure compromise between the government and opposition over legislation needed to implement the budget – reducing one source of uncertainty – it is likely to at least delay action to balance the state’s books and thus ensure its long-term fiscal viability.


“The financial markets also need to consider the economic costs and the implications of the disaster for the public finances,” said research house Capital Economics. “These could be considerable.”


Financial Times