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What will be the economic repercussions of the Japanese tsunami?

Japan is inevitably going to experience economic fall-out after their monumental tragedy and the damage that ensued. With parts of Japan underwater and on fire, shipping containers swept away, major ports and transport routes closed, phone lines jammed, gas shut off and, let’s not forget, the epic damage caused to Japanese architecture and personal assets, there are concerns over how well the Japanese economy will deal with this hit.

Sendai is one of the worst affected areas where production has come to a stand-still at numerous factories. Sendai, a city known for its large car manufacturing industry, has suffered several explosions that have additionally destroyed the area. Production will undoubtedly suffer as a consequence.

Additional damage has also been caused after a major explosion at a Fukishima power plant with a second feared. Concerns of a radiation leak containing plutonium and uranium have been raised but experts are comfortable the situation can be controlled and have increased the evacuation zone to 20km.

Despite Japan being the world’s third largest economy, it is feared it will find it difficult to recover from this disaster due to its colossal public debt. It will consequently undergo close scrutiny by financial markets. This, coupled with the magnitude of the tsunami, its devastation still far from certain, Japan is sure to take a great financial hit.

However, analysts at Devonshire and Douglas Capital Partners are positive that the Japanese economy will make a full recovery by 2012 and will additionally be able to enjoy the economic benefits of reconstruction. It has also been noted the surge in insurance claims could be economically beneficial. The global insurance industry will undoubtedly shudder at this thought, particularly when you consider it is still calculating losses from the earthquake that recently rocked New Zealand.

The Japanese economy may have been shaken by the tsunami but it is well equipped for this type of disaster, being no stranger to earthquakes. It is doubted the total financial devastation will be worse than the Kobe earthquake that ravaged Japan in 1995, which Japan successfully recovered from. With the forty-five countries that have jumped to aid Japan in its recovery, in addition to worldwide donations it is hoped Japan will make a speedy recovery.

by S. C.
09 april 2011, World News > Asia

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