The economic impact of natural disasters is often short-lived. Will this be the case in Japan?
THE full extent of the damage from the tsunami that hit Japan’s north-eastern coast on March 11th is not yet known, but early estimates of the cost are big. Rebuilding homes, factories, roads and bridges could cost as much as $200 billion, some reckon. Quite apart from these direct costs, is the disaster likely to do lasting harm to Japan’s economy?
Much will depend on the success of efforts to prevent a nuclear catastrophe. Assuming the situation at the Fukushima Dai-ichi plant stabilises, the contours of the economic impact of the tsunami itself can already be discerned. Natural disasters disrupt production, much as less destructive episodes of bad weather do. In Japan the interruption to electricity supply means that output has been affected even in areas the tsunami did not directly inundate. Toyota, for example, halted production because of problems with parts and supplies. Operations were suspended in six of Sony’s factories, only one of which was flooded. ...
