What they say

Stephen Archer is a speaker with great charisma. By using illustrations and personal experiences and not being afraid to share his own point of view of the current situation and who is to blame for it, he engages the whole audience, at the same time helping us all to understand the credit crunch a little better.

— Warwick Business School


Quakes, Tsunamis and Economic Aftershocks

Whilst we are still absorbing the enormity of Japan’s tragedy we are also seeing the news hinterland expanding as the implications of the event become clearer. A big question looming now is the economic effect on Japan and the global recovery.

It will have a short and medium term impact on Japan but it has the resources and the resourcefulness to cope with it. There are really no precedents that prove that even a large natural disaster impacting a major economy has a significant global economic effect.  The closest comparison to this disaster is the Japanese earthquake of 1995 that hit Kobe.

This precipitated the demise of Barings Bank but the cause was already in place with Nick Leesons’s dealings and debts.

The Kobe earthquake was 7.3 Richter and killed around 6,500 people. The death rate from the 2011 quake could be three of four times this number. The damage was around $100 billion. The figure for 2011 could double this.

The Japanese Economy went negative in the month of the quake then rose for the rest of the year. The restoration investment caused a healthy growth spike in 1996.

As in 2011, the Nikkei average fell and continued to fall, largely ion fears of the effect of an appreciating Yen. So far, on this occasion the Yen has fallen.

Some major factories in Kobe closed such as Mitsubishi and Panasonic but output was restored within 6 months in the main. For a while there was a global microprocessor shortage. Doubtless the Japanese output of cars and many other products will be depressed but in global terms, most manufacturing industry has spare capacity so Japan’s inability to supply can be taken up by other national producers.  Kobe’s infrastructure was restored to 80% within the year.

So will the same happen this time? I think we can expect Japan to rebound from this with vigour and within a year the economic effects will have dissipitated even if not all the costs will have done.

I think we can also expect to see all sea side Nuclear power stations closed down over time and moved to higher ground…

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