The March 11 Japan earthquake, the 5th largest in world, has affected the world economy in more ways than just economics. So while looking at this major natural disaster the two criteria discussed in the article are Economics & Politics.
The Economics: A classic case of “supply side disruption” fueled by the unpredictable and dangerous cocktail of natural disasters - the Japan earthquake tsunami and nuclear disaster. Japan is amongst the major producers of capital goods and creates 10% of the world economic output. The good exported by Japan, consisting mostly of machinery and transport equipment was in 2010 worth about $470bn. This natural disaster wrecked havoc on the factories producing the goods heavily demanded by the whole world. This was visible in major reduction in production & sales figures of auto majors sourcing from Japan. Their May 2011 sales figures declined nearly 23%. Japan provides nearly 60% of the world’s computer chips and the calamity resulted in closure of 2 companies for repairs reducing the output by 25%. The nations round the world hence need an early recovery for the smoothening of the supply chain and depreciation of Yen.
The fund flowed into the nation for the reconstruction and there was a high appreciation of Yen. The bond market in Japan was also gathering pace. This proved one major point – Investor confidence in Japan’s recovery and repayment capability. The Japanese showed this capability and capacity. They have restored the infrastructure destroyed with great speed. An example of this would be the case of the Tohoku Shinkansen, a high-speed rail line connecting Tokyo and northeastern Japan. It recommenced operations 49 days after the earthquake.
