Business Monitor International Releases Japan Earthquake Implications Report
Released on: April 21, 2011, 3:03 pm
Business Monitor International
Business Monitor International has released a new special
report which covers the probable economic and market implications of
the Japan earthquake to the world economy.
Since the devastating Tohoku earthquake in Japan on March 11 and its terrible
aftermath, there has been much speculation on the scale and scope of a potential
nuclear disaster and the implications the disaster will have on the world financial
markets. The special report seeks to provide some insight into some of the main
economic repercussions ranging from the disruption to Japanese economic growth and
markets through to the impact on commodity prices and the infrastructure sector.
Currently at least 6,000 people are known to have died and many thousands are still
missing, with local authorities reporting that the final toll could exceed 10,000,
which would be greater than the 6,400 killed in the Kobe (Hanshin) quake of 1995.
However, while the human toll is disastrous, the infrastructure analysis provides
the relatively positive news, if there is any, that Japan is better placed than many
other disaster prone countries to respond to the crisis and Japan’s social cohesion
should help it withstand a disaster of this magnitude better than many other
countries. The participation of China and South Korea in the rescue efforts could
also boost the previously strained relations between Japan and its neighbours.
Figures in the report show that there will be severe disruption to economic activity
and that recession risks have returned to the fore, although at this stage the full
impact is difficult to estimate. This comes at a time when it looked like export
growth would boost overall GDP in 2011 following a 1.2% annualised contraction in
Q410. While Tohoku is not a major economic centre, it still accounts for 8% of GDP
and has numerous factories. Meanwhile, power outages across large parts of Japan,
including Greater Tokyo, and supply chain concerns mean that major exporting
companies such as Sony and Toyota have halted some operations indefinitely. Assuming
that net exports place a sizeable drag on headline growth as exports cool and
capital imports surge (as following the Hanshin earthquake in 1995), Japan may
continue to suffer negative sequential growth in H111.
Other insights from the Japan analysis indicate that the Japanese government will
need to spend heavily to rebuild the damage in the Tohoku region, around the city of
Sendai, which will generate economic activity, but the costs will worsen Japan’s
already dire fiscal deficit and debt burdens, and could put gross government debt
through the JPY1,000trn level this year (an estimated 204% of GDP). Additionally,
while markets will remain volatile in the short term, indications are that the
authorities’ response to the crisis means that the medium-term view of a weaker yen
(to JPY85.00/US$ in the first instance) remains on track, and the longer-term view
of an eventual fiscal crisis is reinforced.
Other major areas looked at by the report include the risks for oil & gas prices,
shipping, agriculture, automotive manufacture and the base metals industry, as well
as important regional economic outlooks.
About Business Monitor International:
Business Monitor International was founded in 1984 by Richard Londesborough and
Jonathan Feroze, the company's joint CEOs, who both continue to play a full role
within the company.
BMI's customers and clients span more than 140 countries worldwide, including more
than 400 of the Global Fortune 500 companies. Businesses, banks, financial service
companies, governments, academia and research centres have all come to rely on
BMI's analysis, data and forecasts – and have done so for 25 years. The company was
awarded the Queen's Award for Export Achievement in 1997.
BMI is a wholly independent company, headquartered at Blackfriars, London, with
foreign offices in Singapore and New York.
BMI's corporate mission is to become the world's No.1 Independent Information
Provider in its field (Country Risk & Industry Research).
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