The Impact Of Japan's Earthquake On The Economy - My First Thoughts

On the economy, here are my first thoughts:

First, there will be some disruptions on manufacturing productions and many other services.  FT Alphaville has a nice compilation of how Japanese companies are doing after the quake.  Here are just two examples in that compilation: Sony has six plants halted; Toyota has three group factories halted, etc.  and many more companies are assessing the damages. 

Transportation has been hugely disrupted for the moment, and some ports have also been damaged according to some reports I heard here and there, so companies may have trouble getting their products out even their productions are not halted.  So there are some real major disruptions in terms of economic activities.  Although it is very devastating to an economy which is already quite stagnant, I believe the negative impact will be short-lived.

The more serious issue, I think, is the deficit.  The Japanese government is already hugely in debt.  Disaster in such scale means that the government will have to invest significant amount of money to rebuild what have been damaged.  It is still too early to say how much money the government need, but such a disaster striking at this moment certainly does not bode well for the government as far as public finances are concerned.

Will this disaster pose a significant risk to the global economy?  At this moment, it doesn’t seem very likely.

Read More:

FT Alphaville has this interesting piece on insurance in the ring of fire

Note: I am sure the readers of this website would like to join me and send the deepest condolences to families and friends of those who lost their lives in the 8.9-magnitude earthquake in Japan. Thoughts shall be with the people who are affected by the earthquake and the associated tsunami.

This article originally appeared here: The Impact Of Japan’s Earthquake On The Economy – My First Thoughts
Also sprach Analyst – World & China Economy, Global Finance, Real Estate

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