Due to the damaged power infrastructure, Tokyo Electric Power (TEPCO) has announced rolling blackouts across its service region.
Nomura analyses the potential impact of rolling blackouts, representing a 25% power shortfall, through the end of April:
We estimate negative impact on nominal GDP of up to around 0.29% taking into account ripple impact on other industries: According to reports, analysis of the major power cuts affecting the US in August 2003 shows that power cuts of no longer than three hours do not have that large an impact on sales value except in some nonmanufacturing sectors (finance & insurance, information & telecommunications). Based on this research, we estimate that a 25% cut in power supply could depress production in the manufacturing sector by 2.5% and in the nonmanufacturing sector by 5% (with a negative impact of 10% for both finance & insurance and information & telecommunications). On that basis, we estimate the negative impact including the ripple effect on other industries of the rolling power cuts at around 0.29% of nominal GDP. Although we think these estimates could end up being on the high side, we would caution that power supply cuts are bound to have a negative impact on the Japanese economy. (BH)
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