Japan's recent earthquake and tsunami have devastated the country and sparked fears of a nuclear crisis. The crises in the world's third-largest economy have also had far-reaching economic consequences, both expected and unexpected.
Japanese economy Goldman Sachs estimates that Japan's lost $193 billion--around 3.3 percent of the country's gross domestic product--in buildings and production facilities, and power shortages, supply-chain disruptions, and diminished tourism will also take a toll, points out The Wall Street Journal's Peter Stein. Yet The New Yorker's James Surowiecki explains that developed economies like Japan's often rebound swiftly from catastrophes and may even grow more quickly in their aftermath. Why? "Even though natural disasters destroy physical capital," he notes, "they don’t diminish the true engines of economic growth: human ingenuity and productivity." What's more, these economies, when rebuilding, often decide to "upgrade infrastructure and technology, and shift investment away from older, less productive industries."
Global Economy The crisis might have little effect on the global economy, says the Journal's Stein. Bank of America Merrill Lynch, for example, estimates that "no growth at all in Japan this year would knock only a tenth of a percentage point off global GDP growth." But he adds that enduring power shortages and supply-chain distruptions, or panic among consumers or in financial markets could derail the global economic recovery. The New York Times adds that the Japanese crises---combined with Mideast unrest, a renewed European debt crisis, and a weak U.S. economy--has produced potentially toxic uncertainty.
Commodities Energy, metal, and agricultural prices are declining across the board on expectations that Japan's demand for resources will slow, according to MarketWatch's Myra P. Saefong, but she predicts the trend will reverse as Japan rebults.
Meat and Fish Container ships with tons of pork and steak are idling in the Pacific or at docks in Japan because of concerns that electricity outages interfered with refrigeration and spoiled meat, the Times reports. The fishing industry in northeast Japan, meanwhile, has suffered extensive damage to its infrastructure, as global demand for Japanese fish is threatened by fears of contamination stemming from the nuclear crisis.
Automobiles Japan’s automakers have temporarily suspended production at many plants as they contend with power outages, while U.S. and European automakers cope with an uncertain supply of Japanese-made auto parts, the Times says. General Motors announced last week that it would suspend operations at a factory in Louisiana because it was running short of Japanese parts.
2:35pm - The Economist has posted a chart indicating that the Japanese earthquake could be the costliest disaster ever. The World Bank is estimating that the disaster in Japan will cost $235 billion, or about 4 percent of Japan's GDP. The next costliest disaster? Japan's Kobe earthquaker in 1995, followed by Hurricane Katrina in 2005.
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