Japan spiraling down and out?

With the 1 month anniversary of the 9.0 earthquake, and the tsunami that followed, that hit Japan on 11th March passing, people are going to have start thinking about the huge impact that has had on Japan, and indeed the rest of the world.

Unsurprisingly, so far, most of the focus has been on the Fukushima nuclear plant, which has experienced a series of explosions, leaks and fires. This in itself has a whole multitude of problems, and the radiation has made its mark on the world, with traces of radioactive iodine being found as far as the UK. This has caused huge concern, even if the levels were far from harmful, and people had initially been fearing that the world could face another Chernobyl - like disaster.

Fortunately, the possibility of that occurring has passed, but people must look to the consequences for Japanese Economy and the world. Before the disaster, Japan was the 3rd largest economy in the world, despite its small size, competing with China for 2nd spot behind the US. Now, it is set to plummet, with the power outages resulting from the earthquake being a major factor in this slowdown. In the last quarter, GDP in Japan has already dropped by 1.3%, and more worryingly, exports in Japan fell by 2.2% for the first time in more than 18 months, with the car industry hit the hardest, dropping by 28%. This is a concerning figure, and major car companies such as Toyota, Honda and Nissan are sure to experience major losses over this quarter and the next as the country tries to pick up the pieces from the disaster.

Of course, the largest impact has not been on nations and companies, but on people. Since the tsunami, more than 14,000 have been confirmed dead with over 13,000 still missing and unaccounted for. It has been grim at best for residents in Japan, especially in Tokyo and northern Japan, where a combination of severe aftershocks and extreme weather has prolonged the suffering during March and in the first weeks of April.

All of this has set the stage for the Japanese economy to stumble through what should have been the year of a smooth global recovery. Nevertheless, the Japanese spirit has earned much praise over the last few weeks, and rightly so. Stoicism will be vital since returning to normalcy will be no overnight fix. As Hurricane Katrina proved - even the richest countries take time. Moreover, when the cost of repairs has been estimated at $300 billion, the government are likely to struggle arranging such funds already being under their massive debt burden. Worse still, the opposition party has put its foot in the door at every opportunity, attempting to capitalise upon the disaster to return to power. Japan will need to address both its economics and politics in the wake of this disaster. And in that case, it may be decades before Japan will be truly on the road to recovery.

Sun, May 1, 2011  Permanent link

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