Positives of a post-disaster economy
The economic dynamics of Japan, as the world’s third largest economy and specialist in energy supply industry, offer viable solutions in the face of the world’s 7th largest natural disaster. The comparison of the Fukushima Daiichi nuclear crisis with the Chernobyl disaster and of the economic losses to the loss of $100 billion after the 1995 Kobe earthquake, account for a soft patch in Japan’s economy according to what global experts are saying.
Apart from the difficulties of securing a calculation of consumer sentiments for factory production from Japan or factors of supply chain management, the pragmatic approach of the country’s government and citizenry needs appreciation for creating a unified national consensus on each step towards recovery.
The planning and efforts have led to positive expectations from the third quarter of the fiscal year. To deal with the massive repair bill, the accord of the ruling and opposition party towards an extra ‘quake budget’ on the Premier’s plea to ‘save the country’ stands pertinent.
Moreover, the conscience of the public in supporting the tax hikes for reconstruction plans can be regarded as commendable, particularly in the contrasting view of public reaction for tax increase in 1997 and last year. The Liberal Democratic Party lost control following a recession in 1997, while last year Naoto Kan’s party lost the election on just the mention of a possible increase in sales levy.
Other recovery measures include the companies opting for liquidating their foreign holdings. This selling of foreign assets will result in buying more yens and a consequent generation of more capital to pay for rebuilding funds. Also, provision of liquidity for the banking sector is being strongly backed by the Bank of Japan.
These measures can be linked to 2010 when Japan’s economy was already in a phase of contraction but with positive hopes for 2011 that were unfortunately crushed by the massive earthquake. Estimates just for March count for a loss of $297.8 billion, with an instant fall in yen by 0.3 percent against the US dollar.
In the wake of nuclear disruption, the halting of the country’s giant production sectors draws a grave picture. Currently, the major positive anticipations are only linked with the construction industry which will enter a boom in rebuilding projects. This positivism does not surround any other sector, with a major setback being rendered to leading manufacturers.
The 420,000 cars producing Toyota, along with Nissan and Honda, were shut off for some time. Resumption of production comes with the limitations of scanty automobile parts threatening exports to major global markets. As a giant car manufacturer, Japan faces an increase in public debt and a cut in export capital.
A significant reason for the manufacturing crisis is the electricity shortage. The damaged nuclear plants counted for about 29 percent of Japan’s power supply. Therefore, amid warnings of rolling blackouts the utility sector remains passive.
This is the same Japan, developing ties with the strong economies of India and Russia to recover from the 2010 recession. With hopes intact, the focus is now on the good that the earthquake can bring to Japan.
A greater participative public with an equally responsive government, greater environmental precautions, increased selfdefence measures and greater sensitivity towards a vulnerable economic and geopolitical scenario, all will contribute to an even stronger economy for Japan in the coming times