Damage to economy worse than thought
Source: Agencies |
April 13, 2011, Wednesday
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THE economic damage from Japan's massive earthquake and tsunami last month is likely to be worse than first thought as power shortages curtail factory output and disrupt supply chains, the country's economics minister warned yesterday.
The Bank of Japan governor said the economy was in a "severe state," while central bankers were uncertain when efforts to rebuild the tsunami-ravaged northeast would boost growth, according to minutes from a meeting held three days after the earthquake struck on March 11.
The government and main opposition party have agreed to a spending package to get some reconstruction work started, but setting a large additional budget will be difficult due to Japan's heavy debt burden.
"After a natural disaster, people tend to refrain from spending and you get a sense that factory output will shrink," Economics Minister Kaoru Yosano said. "In some areas, the impact could be very big."
The government estimates the material damage alone could top US$300 billion, making it by far the world's costliest natural disaster.
Finance Minister Yoshihiko Noda said he would explain the Japanese government's efforts on post-quake reconstruction and the crisis at a G20 meeting in Washington on Friday.
Measuring the impact on consumer sentiment, factory production and the supply chain is proving more difficult, but as the nuclear crisis drags on, the damage to the economy looks to be more severe.
"We were in recession already," said Takuji Okubo, chief economist for Japan at Societe Generale. "This time it will take longer for industrial production to rebound, because just-in-time delivery systems have become even more complicated."
Japan's economy is likely to grow 1 percent this year as private consumption slows to a halt, Okubo said.
Shortages of key components, including semiconductors, point to the possibility of deeper and longer-running output disruptions from Japan that could also hobble factories elsewhere in the world which rely on Japanese parts.
The Bank of Japan governor said the economy was in a "severe state," while central bankers were uncertain when efforts to rebuild the tsunami-ravaged northeast would boost growth, according to minutes from a meeting held three days after the earthquake struck on March 11.
The government and main opposition party have agreed to a spending package to get some reconstruction work started, but setting a large additional budget will be difficult due to Japan's heavy debt burden.
"After a natural disaster, people tend to refrain from spending and you get a sense that factory output will shrink," Economics Minister Kaoru Yosano said. "In some areas, the impact could be very big."
The government estimates the material damage alone could top US$300 billion, making it by far the world's costliest natural disaster.
Finance Minister Yoshihiko Noda said he would explain the Japanese government's efforts on post-quake reconstruction and the crisis at a G20 meeting in Washington on Friday.
Measuring the impact on consumer sentiment, factory production and the supply chain is proving more difficult, but as the nuclear crisis drags on, the damage to the economy looks to be more severe.
"We were in recession already," said Takuji Okubo, chief economist for Japan at Societe Generale. "This time it will take longer for industrial production to rebound, because just-in-time delivery systems have become even more complicated."
Japan's economy is likely to grow 1 percent this year as private consumption slows to a halt, Okubo said.
Shortages of key components, including semiconductors, point to the possibility of deeper and longer-running output disruptions from Japan that could also hobble factories elsewhere in the world which rely on Japanese parts.
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