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The Economic Effect of Japan's Earthquake, Tsunami and Nuclear Disaster

On Friday, March 11, 2011 at 2:46 pm, a 9.2 earthquake struck off the coast of Japan. This lead to a chain reaction of events leading to a tsunami, and a nuclear disaster as one of Japan's power stations leaked radiation. What are the global effects of these three disasters?

1. Higher Energy Prices

Energy prices are soaring because of the fear that the current unrest in the Middle East is affecting the global supply of oil. The disaster in the Fukusima power station highlights the need for Japan to now import traditional energy sources to replace any energy produced through its nuclear facilities- which will add to more demand for natural gas, and oil.

2. Infrastructural Renewal Projects

Both the earthquake and the tsunami have badly damaged much of Japan's infrastructure. Obviously a rebuilding phase would mean a government with a high debt problem, would have to invest in the reconstruction of those areas affected by this triple disaster. This could become the responsibility of the corporate sector, who dominate Japan's economy.

3. Banking and Insurance Losses

Whether Insurance companies pay out billions of dollars of claims due to the the earthquake and tsunami, remains to be seen, but the "man-made" nuclear disaster could become their liability. Japan's global banking and insurance industries may be forced to reinvest at home, depleting any global investments outside the nation.

4. Change of Government?

Before these three disasters, ordinary Japanese had lost their confidence in another scandal hit government. How the government reaction to these three disasters, and the subsequent rebuilding process, could change the public perceptions of their leaders- but in the long term, we could see more changes inside the top echelon of the Japanese government.

5. Environmental Perceptions

After the nuclear disaster in Fukusima, many people are questioning the wisdom of building nuclear energy plants in a quake zone. Depending on the radiation levels, and the area contaminated, a worldwide reaction to the use of nuclear energy could result in the ending of the Obama nuclear energy program in the USA, and even France's ambitious energy program.

6. Money Markets

Japan remains the worlds third largest economy, but also like the United States, one of its biggest debtors. The value of the yen could fall, as banks spend on reconstruction projects, whilst the Government may be forced to raise taxes to pay for them. Some large Japanese corporations may cancel or put on hold overseas projects, re-investing these funds in rebuilding the areas affected by the earthquake.

7. Asian-Pacific Growth

China has the money and the economy in this region, but Japan is a second player in economic terms. Japanese companies invest in much of South East and North Asia, whilst the government often sponsor education & training programs in the region. Japan's contributions in the area, could shrink, leading to some fears of reduced growth.

The natural disasters of the earthquake and tsunami, have led to the man made nuclear disaster, and destruction of part of a high tech nation.. Japanese are resilient, inventive and industrious people, and should overcome the hurdles of reconstruction. However this does have a short term effect on the global economy, and a long term effect on the future of the nuclear power industry.

Article Source: http://EzineArticles.com/6073193