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Japan Diary

March 13, 2011

How will the Japanese earthquake affect the world?

The aftermath of the quake is terrible. From tomorrow electric black-outs are planned in the vast area, including Tokyo (Many power plants, including nuclear, in the Tohoku area have been hit by the quake).

However, the center of the Japanese economy remains intact (The severely hit Tohoku area has some automobile factories, though). In the Tokyo area earthquake in 1923 the damage corresponded to several years of the governmental budget, but in Osaka area (the second largest city in Japan) earthquake in 1995 the damage amounted to one fiftieth of the GDP.

All in all, the quake will pull down the economy at first (probably less than one percent of the GDP), and then the massive relief and reconstruction spending by the government will boost the economy for years to come, which was the case in Osaka area earthquake, too.

Problems are as follows:
①The relief spending will be financed by new issues of governmental bonds. Massive spending may cause inflation and a financial collapse (indebtedness of the government already amounts to two years of GDP), but may not, because the governmental bonds are digested mainly by domestic savings which still surpass the volume of the debts).

②Yen's rate may go up at first. It was the case in Osaka area quake in 1995, because Japanese investors sold up foreign assets for acquiring cash.
But in the case of Tokyo area quake in 1923 imports grew so much that Japan came to have trade deficit. If the same occurs this time, then yen rate will eventually go down.

③Nuclear power may again be discredited globally. In that case the prices on oil and natural gas will go up.

The brighter side of the quake is as follows:
①Apparently no bullet train (Shin-kansen) got derailed because of the quake.
②No high-rise building was damaged. Even window-glass did not fall down in Tokyo despite the swing.

The political effect of the quake is as follows:
①Prime Minister Kan's government will hold on for a while. Just before the quake there was a wide reporting about illegal political funding to him, and he would have certainly got into a serious trouble. It is now forgotten. And the opposition parties will not be able to obstruct the adoption of the next governmental budget. This will remove a serious hurdle for Kan. But if his government poorly manages the aftermath of the quake, pressure on Kan will mount again.
He is already overshadowed by his deputy Edano in decisiveness and grasp of the matter (it is Edano who is constantly on TV screen for briefing). Perhaps, the Domocratic Party may switch its top from Kan to Edano.

②Not only the U.S. and others, but also China has sent a rescue team to Japan. "China gives offers help to the Japanese."--this sounds a bit tickling for us, but in general our feeling toward the Chinese will become warmer, if the activity of the Chinese team gets wide coverage, and if they will not work solely for the rescue of the Chinese trainees buried in the inflicted area.

③Libya's Gaddafi has got a respite of a few days. The TVs are all occupied by the quake news. For the time being he can shoot as much as he wants.


Author: patrice | May 6, 2011 10:29 AM

this was no help at all i needed how it will affect the world government. so yeah.

Author: vikas kumar | June 15, 2011 7:19 PM

sir , it was really nice to read. This article dealt with each and every aspect of Japan. sir , i am a student from India and i am doing my graduation in Japanese language . i want to know how can this disaster affect me in getting job after completing my graduation after 2 years ??

(Do not worry. Employment of foreigners is becoming more and more common for Japanese firms. KAWATO)

Author: Habiba | December 2, 2013 1:59 AM

This was no help at all

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