WSJ: Quake to Test Japan’s Economy, Markets

The history of rich countries recovering, albeit painfully, from large natural disasters is encouraging. The resilience of Japan after the 1995 Kobe earthquake is the most obvious—and encouraging—example.

The question hanging over Japan and the rest of the world: Is this time different?

Will physical damage, particularly the still-uncertain fate of nuclear-power plants, be more difficult to repair? Has globalization made the world more vulnerable to one big economy? Will the weekend’s jarring videos and headlines from Japan, combined with unease about the Middle East and Europe, undermine financial markets already distrustful of global governments’ ability to repay debts?

The immediate impacts on Japan are hard to quantify, but relatively easy to sketch out. Production will suffer. Japan’s auto makers all but suspended domestic manufacturing. Sony Corp. shut six electronic-component factories. Kirin, Asahi and Sapporo breweries accounting for about 40% Japan’s beer production are out of action.

Nomura economists had forecast Japan—whose economy contracted in the last quarter of 2010—would “exit the current lull” in the second quarter of this year. Now they say that won’t happen until the third or fourth quarter. “Considering the major disruption to infrastructure such as roads and electric generation facilities, we think the short-term impact on economic activity could be greater than after the Kobe earthquake,” they said in a note……Learn More

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Posted by Jose Reyes on Mar 17 2011. Filed under Current News, Economy, Post To Slider. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry