The Earthquake Brought The Global Economy A Variable In Japan'S Economy

Huge losses hit Japan's economy

Murashima Kichi, an economist at Citigroup, estimates that the total losses caused by the earthquake will be 5 trillion to 10 trillion yen (1 US dollars, or 81.65 yen), of which only a trillion yen will be lost.

In 1995, the Hanshin earthquake caused about 8 trillion and 200 billion yen economic losses to Japan. The data released by Merrill Lynch showed that Japan's economic growth rate dropped by 0.4 to 0.5 percentage points in that year.

Kalish, director of DDT global economic research department, said the earthquake will slow Japan's exports in six months, resulting in a slowdown in the Japanese economy.

Karl Weinberg, chief economist of the US high frequency economic information society, said that although the impact of the earthquake can not be accurately calculated, the impact of the earthquake on the Japanese economy may be greater than that of the Kobe earthquake.

Moreover, whether New York, after the "9 / 11" terrorist attacks, or New Orleans, which was devastated by the "Katrina" hurricane, suffered an economic recession after the great disaster. This earthquake will bring heavy losses to the depressed Japanese economy, and the performance in the second quarter will be the most weak.

Nomura said in a report that the Japanese economy had already shrunk before the earthquake. Now it is longer than expected to get out of the weak state.

Mark Zandi, chief economist of Moodie economic analysis company, even said: "the Japanese economy is facing a risk of another recession."

Infrastructure damage affects global supply chain

Japan is the third largest economy in the world. Its manufacturing industry occupies an important position in the global economy and is a crucial link in the global supply chain.

Japan produces 40% of the world's mobile phone and computer chips, and 1/5 of semiconductor products.

Toyota Auto Body Co is the world's largest automobile manufacturer.

SONY group provides electronic products for consumers all over the world.

The earthquake hit the northeast coast of the heavily damaged areas of the automobile, nuclear power, petrochemical and semiconductor industries and many other important industries.

After the disaster, a large number of infrastructures, including power grids, roads and ports, were destroyed and many nuclear power plants exploded.

Power cuts in turn have resulted in the closure of enterprises in the disaster area and the impact of almost every company in Japan.

SONY has shut down 6 factories, TOYOTA motor also plans to stop production activities in all 12 factories in Japan by 16 days, which will result in the group's production of 40 thousand cars.

South Korean enterprises, which rely heavily on Japan for LCD screens and chip devices, will be most affected.

South Korea's Hynix Semi-conductor Inc, the world's second largest memory chip maker, is concerned that the Japanese earthquake will lead to a cut-off in production and lead to a rapid rise in product prices in the near future.

The US solar module manufacturer SunPower20% relies on Japanese enterprises for its chip sources, and is also very concerned about the impact of the earthquake.

Raising funds for reconstruction or triggering global asset sell-off

Japan's efforts to raise funds for reconstruction may exacerbate the trend of global asset sell-off.

Weinberg said that Japan needs a lot of reconstruction funds, but at present, the Japanese government debt is two times more than the total economy. It is the most developed country and Japan's fiscal deficit accounts for nearly 10% of GDP.

This may lead to the reinvestment of overseas investments in Japan, which will lead to asset sell-off.

In addition, a large number of insurance companies and reinsurance companies will also sell assets because they need to pay for earthquake losses.

Global financial markets may face turmoil.

According to the IMF, private investment in Japan amounted to 166 billion dollars in 2010.

Japan is the third largest holder of US Treasury bonds. As of the end of 2010, it held nearly US $900 billion of US Treasury bonds.

If Japan sells US Treasury bonds, the US dollar will go down, and the cost of us financing will go up further.

Large demand for raw materials or inflation expectations

Although Japan's economy will shrink in the short term, economists generally believe that the reconstruction process can create employment, which is conducive to Japan's economic development in the long run.

Kalish said that in the process of reconstruction, both the government and the private sector will invest heavily, so I believe that in the next few years, the Japanese economy will grow accordingly.

JP Morgan also believes that the post disaster reconstruction process will play a catalytic role in the Japanese economy, thereby increasing Japan's economic growth in 2012 from 1.8% previously estimated to 2%.

Citigroup also raised this estimate from 1.9% to 2.1%.

Japan is a major importer of commodities in the world. Post disaster reconstruction and subsequent economic development require a lot of raw materials.

Global demand for commodities increased or pushed up prices and increased global inflation expectations.

Oppenheimer, general manager of the US fund of Li Shanquan, said that in order to resume production after the disaster, Japan should first restore its power supply, but at the moment, the short-term core will be severely restricted, which will inevitably aggravate the demand for traditional energy crude oil and coal.

Therefore, he believes that the price of crude oil will go up further, and the world will face more inflationary pressure.