World Clock

Friday, 11 March 2011

Japanese Earthquake - Economic and Financial Impact


"The Pulse" with Maryam Nemazee on Bloomberg TV

According to renowned economist Nouriel Roubini, this earthquake could not have come at a worse time for the Japanese economy. (see last minute of the video above)

Already Japanese debt to GDP is by far the highest in the developed world. Indications are that the aftermath recovery could send this level even higher, potential to 210% according to

The chart below shows already how Japanese companies have been affected by this earthquake and the resulting Tsunami

Production and businesses disrupted

Production halted at six plants
Toyota Motors
Three group factories halted
No impact reported
Nippon Telegraph & Telephone
Restricted calls to some areas including Tokyo
Nissan Motors
Halted production at four plants, two injuries
Honda Motors
Halted two plants, one employee killed, about 30 injured
Assessing damage, several workers with minor injuries
Fuji Heavy Industries
Five plants halted
Damage at Sendai and Chiba plants
East Japan Railway
Halted train services in Tokyo area
Mobile-phone service disruptions

Insurers have also been hit hard today in European stock market trading. This adds to Insurers woes after a year when total payout from natural disasters have totalled $36bn.

The widening of CDS spreads in major European re-insurers the major concerns surrounding the potential size of their exposure to the Japanese earthquake and tsunami.

For a detailed breakdown of the impact on the share prices of the re-insurers click the link below from the FT (11/03/2011)


"Strategy Session" with Becky Quick on CNBC

According to Sean Egan of Egan-Jones Rating Co. says this disaster will make it increasingly difficult for Japan to deal with its sky-rocketing public debt levels, which he says is actually as high as 240%.

The Wall Street Journal gives a preview of the week ahead in the Asian market for next week in the aftermath of the devastating earthquake.

1 comment:

  1. The long term impact from the earthquake with depend on how the performance of the Yen. The repatriation of foreign assets by the Insurers to pay compensation will be an upward pressure on the Yen. The strength of the Japanese Yen will be the real danger to the Japanese economy.

    Interestingly, the quick notes coming out of the desks are saying the European Insurers have the most exposure as a region to the Japanese quakes. Since they need to pay compensation, they need to liquidate assets. Assuming they are long their domestic bonds, it would increase the European yields. Another factor in the existing problems of the European sovereigns.

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