Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Sheffield "Mi Amigo" Memorial Fly Past at 8.45am on 22nd Feb 2019 - 20th Feb 19
Here’s The Real Reason You Stress About Money - 20th Feb 19
Five Online Marketing Predictions that will Matter in 2019 - 20th Feb 19
Has Gold Price Reached Upside Resistance Near $1340-1360? - 20th Feb 19
So Many Things are Not Confirming Stock Market Rally - 20th Feb 19
Forex Trading Management: The Importance of Being Prepared - 19th Feb 19
Gold Stocks are Following This Historical Template - 19th Feb 19
Here’s Why The Left’s New Economic Policies Are Just Stupid - 19th Feb 19
Should We Declare Emergency for Gold? - 19th Feb 19
Why Stock Traders Must Stay Optimistically Cautious Going Forward - 19th Feb 19
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble - 18th Feb 19
Stacking The Next QE On Top Of A $4 Trillion Fed Floor - 18th Feb 19
Get ready for the Stock Market Breakout Pattern Setup II - 18th Feb 19
It's Blue Skies For The Stock Market As Far As The Eye Can See - 18th Feb 19
Stock Market Correction is Due - 18th Feb 19
Iran's Death Spiral -- 40 Years And Counting - 17 Feb 19
Venezuela's Opposition Is Playing With Fire - 17 Feb 19
Fed Chairman Deceives; Precious Metals Mine Supply Threatened - 17 Feb 19
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

Economic Aftershocks of the Japan Earthquake

Economics / Japan Economy Mar 14, 2011 - 06:38 AM GMT

By: Money_Morning

Economics

Best Financial Markets Analysis ArticleDavid Zeiler writes: The 8.9 magnitude earthquake and resulting tsunami that hit northeastern Japan today (Friday) had an immediate impact on financial markets all over the world. However, the effects of the damage and rebuilding will reverberate through the Japanese economy for months, if not years.


In the immediate aftermath of the earthquake, which struck in midafternoon, factories shut down, railways stopped running and roads, ports and airports closed. Markets remained open, but a lack of power and a disruption of the mobile networks curtailed trading after the temblor struck.

Some of Japan's biggest companies were affected:

•Nissan Motor Co., Ltd. (PINK: NSANY) halted production at four factories in the area hit.
•Toyota Motor Corporation (NYSE ADR: TM) closed two assembly plants and a parts factory.
•And Sony Corporation (NYSE ADR: SNE) closed six factories.
"This is certainly the worst thing that can happen in Japan at the worst time," economist Nouriel Roubini told BloombergTelevision, noting that Japan's deficit is 10% of its gross domestic product (GDP) and repairing the damage from the quake will cost the country tens of billions, if not hundreds of billions of dollars.

Because Japan is the world's third-largest economy (as measured by gross domestic product), economic turmoil there soon ripples out to the global economy.

One immediate international consequence to the quake was a drop in oil prices, with oil dipping 3.6% to $99.01 a barrel in New York on Friday. In London, Brent crude dropped 2.8%.

The quake forced the closing of several refineries, including three operated by JX Nippon Oil & Energy Corporation (PINK: JXHLY) that process 600,000 barrels a day. Japan normally uses a total of 4.42 million barrels a day, compared to U.S. consumption of 19.25 million.

"With Japan's economy decimated, it will constrict oil demand from Japan," Mike Fitzpatrick, editor of Energy Overview newsletter, told ABC News. "For the moment, the tsunami problem seems to have trumped Libya concerns apparently."

Concerns over the cost of the disaster slammed foreign insurance and reinsurance companies, with the stocks of several big reinsurers taking hits of 5% or more. Nevertheless, officials at major insurance companies don't expect huge losses.

"While today's event is unique, it is worth noting that in the most recent major earthquake in Japan, the 1995 Great Hanshin-Awaji Earthquake in Kobe, the economic loss was estimated to be in the region of 2.5% of Japan's [gross domestic product] at the time and the insured loss was only in the region of $3 billion, which was mostly retained domestically," James Vickers, Chairman of Willis Re International & Specialty, part ofWillis Group Holdings PLC (NYSE: WSH), told the Wall Street Journal.

In fact, investors already may be factoring recollections of the Kobe earthquake into their calculations.

The Japanese yen, which fell initially, quickly reversed its slide and closed stronger against the dollar as traders remembered that capital came flowing back into the country after the 1995 quake, boosting the yen to an all-time high.

Investors should also take heed of what happened to Japanese equities following the Kobe earthquake. Within six months of that January temblor, the Nikkei 225 index lost 25% of its value. But by the end of 1995, it had fully recovered.

"Stocks will probably fall on Monday, especially of those companies that have factories in the affected areas. But on the whole the sell-off will likely be short-lived," Mitsuhsige Akino, a fund manager at Ichiyoshi Investment Management, told Reuters.

One sector that stands to benefit is large construction companies, which outperformed the market in 1995. Sure enough, Kajima Corporation (PINK: KAJMY), a major Japanese contractor, was up 11% on the Tokyo Stock Exchange on Friday.

The Kobe experience also demonstrated how Japan, as a developed nation, has the resources to rebound from disasters relatively quickly.

Six months after that quake almost all of Kobe's factories had reopened and the city's infrastructure repaired. All the trains were running within nine months, and the port was 80% functional within a year.

Japan's biggest economic headache will be paying the bill.

"The government would have to sell more bonds, but this is an emergency, so this can't be avoided," Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo Yamamoto, told Reuters.

Source : http://moneymorning.com/2011/03/11/...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules