Economic Impact of the Japan Earthquake/Tsunami
We have all seen the harrowing images on TV that looked like something out of a Hollywood disaster movie so we know the incalculable and incredibly tragic human loss and suffering that has been caused by the 11 March 2011, Tohoku earthquake and tsunami in Japan.
What is only now being calculated is the economic devastation that the disaster has left in its wake – it isn’t just the homes, roads, bridges, vehicles and entire habitations that are destroyed; the financial impact of the incident is making its effect felt in many more ways; in Asia and all over the world.
Japan is the world’s third largest economy and among the main worries is the ripple effect that will be felt the world over as a result of the devastation in Japan – not just to the financial world, businesses and industry but also the damage resulting from the destruction of the nuclear power plant. Stock markets and financial circles the world over were negatively impacted by the earthquake and resultant tsunami.
While some experts express the apprehension that this will trigger a global recession much like the one three years ago, triggered by the collapse of the US investment bank Lehman Brothers, leading economist have said that there is no real danger of this happening.
Though the estimated loss to Japan is estimated to be in the region of tens of billions of dollars, reports say that it could have been worse than is – the fact that the worst of the damage has been in the areas that are less industrialized than other areas of Japan, has had limited economic impact. When the Kobe earthquake occurred in 1995, this had a far worse impact in terms of economic cost.
In countries such as South Korea and Taiwan and China, there has been a short term benefit – as the product output of Japanese companies falls, the demand for products from these other countries has soared. So right now, these countries could experience a small economic boom as a result of the increased demand of products. However very soon the scenario could change; when these businesses are negatively impacted by Japanese raw materials not reaching them.
The whole impact of the earthquake and resultant tsunami will only be fully understood in times to come, and the healing and the recovery process will doubtless be difficult and protracted.
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