EIU_Japan's Economy after the Quake_March 23_11
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Transcript of EIU_Japan's Economy after the Quake_March 23_11
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Japan’s economy after the quake
Kilbinder DosanjhSenior Analyst, AsiaEconomist Intelligence Unit
March 23rd 2011
Economist Intelligence Unit26 Red Lion SquareLondon WC1R 4HQUnited KingdomTel:+44 (0) 20 7576 8181www.eiu.com
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Japan’s twin disasters: What we know
• The human cost- likely to exceed 10,000
• Many companies (Sony, Toyota) have shut factories in affected area
A short term issue, and will depend on whether companies can divert orders to other factories
• As much as 10% of national power production temporarily down
• Rolling blackouts will continue until end-April
• Possible long-term impact on power supplies
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Japan’s twin disasters: What we know
• Sendai accounts for half as much economic activity as area affected by Kobe in 1995
• Supply chains nationwide disrupted
• Government debt position (200% of GDP) worse now than in ‘95 (79%)
• Volatility in global financial markets
020406080
100120140160180200
1990 - Q1
1992 - Q1
1994 - Q1
1996 - Q1
1998 - Q1
2000 - Q1
2002 - Q1
2004 - Q1
2006 - Q1
2008 - Q1
2010 - Q1
Government debt, % GDP
Kobe earthquake
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Japan’s twin disasters: What we think we know
• Economy will likely contract in Q2
• Reconstruction (est US$200bn) could start quickly
• Slowdown could be reversed before end of the year
• Our current forecast? GDP +1.4%, down from 1.6%; better result in ’12
• Commodity prices? Yen? To come
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1990 - Q1
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GDP growth, SA QoQ %
Japan did not experience even one quarter of contraction in the aftermath of Kobe in 1995
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Japan’s twin disasters: What we think we know
• Exports to China, US, Southeast Asia could be affected
• Imports from same places at risk
• Replacement suppliers may jump-in
• Japan may repatriate capital
• Less demand for oil, commodities?
• Commodity prices? Yen? To come
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Japan’s growth vs. other major economies
-10.0
-5.0
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5.0
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15.0
20.0
1995
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South Korea China Germany US Japan
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Japan is a major consumer of commodities
% of global consumption (2009)Source: Economist Intelligence Unit.
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Aluminium Nickel Zinc Crude oil
Japan US South Korea
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Japan’s twin disasters: What we know we don’t know
• Will the nuclear crisis be contained? If it is not, or if Tokyo is drawn in, all bets on economic
impact are off
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Scenarios for the Fukushima Daiichi nuclear plant: Benign
• Benign scenario: 70%
• Worries about radiation poisoning have triggered panic-buying of supplies, prolonged office closures
• Economic activity in areas of Japan that did not sustain serious physical damage could return to normal fairly
* Assigned EIU probability is subject to change as events continue to unfold.
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Scenarios for the Fukushima Daiichi nuclear plant: Persistent uncertainty
• Persistent uncertainty scenario: 27%
• Even if the latest emergency measures succeed, as yet unforeseen problems could surface in the other reactors
• This, in turn, would delay the reconstruction-driven up-tick in the rate of economic growth
* Assigned EIU probability is subject to change as events continue to unfold.
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Scenarios for the Fukushima Daiichi nuclear plant: Worse-case
• Worse-case scenario: 3%
• The outlook would deteriorate dramatically in the worst-case scenario of a nuclear meltdown accompanied by widespread contamination
• The economic costs of the disaster would multiply accordingly
* Assigned EIU probability is subject to change as events continue to unfold.
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About the Economist Intelligence Unit (EIU)
Research arm of The Economist Group for business executives650 analysts and industry specialists worldwide covering
• Analysis and forecasting for over 200 countries and territories
• Risk assessment
• Industry data and trends: automotive, consumer goods, energy, financial services, healthcare, technology
• Market sizing
• Custom client research
Visit www.eiu.com to register for free macroeconomic information on 187 countries
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EIU’s Japan Analyst
Kilbinder DosanjhSenior Analyst, Asia
Economist Intelligence Unit
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Latest special reports from the EIU
2011 Liveability Ranking and OverviewReport assessing living conditions in 140 cities around the worldhttp://www.eiu.com/liveability
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Triggerpoints: The world’s emerging car marketsForecasting demand in emerging car marketshttp://www.eiu.com/triggerpoints
Download free executive summaries or purchase the full report
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Contact for more information:
Holly DonahueSenior Marketing ManagerEconomist Intelligence [email protected]+1 212 541 0596