Thursday, March 17, 2011

Japan's Disaster Affects Global Economy

The tsunami disaster in Japan and the nuclear crisis has put a strain on the already fragile global economy.

The disaster has rattled markets across the world, though its impact is believed will be slight and short-termed.

Japan, whose contribution to world economy has decreased by half in the last 15 years is known for its resilience enabling it to rally fast following past disasters.

Accustomed to natural disasters, earthquakes in particular, Japan has so far healed its wound relatively much easier than many other countries.

Producers returned to their normal production levels 15 months after the Kobe earthquake in 1995 which left 5 thousand people dead. 4 out of every 5 stores also re-opened within a year and a half.

In other words, Japan defied guesses that the period for its economy to rally would take a decade.

Although the latest disaster in Japan has aroused concern in financial circles all around the world, there are different views regarding its impact on the global economy.

While Japan's contribution to world economy accounted for 18 percent of the whole in 1995, this receded to 9 percent last year.

Some economists call attention to the fact that Japan is not the driving force of economic growth in Asia or in the world.

One of the world's leading importers of oil, agricultural products and raw material, Japan, with a weakened economy, may lead to reduced prices of goods.

However, different effects may also come into the fray.

It is feared the shortage of electricity in Japan will have an adverse effect on the production of steel, automobile spare parts and electronic goods.

For example, more than one third of the US imports from Japan are comprised of cars and car spare parts.

To put it differently, production in Japan coming to a halt or dwindling is something the whole world is closely interested in.

Meanwhile, there is also the possibility of Japan bumping into difficulties in getting financial support in the re-structuring of its devastated regions.

The damage the disaster has inflicted on Japan is estimated to be more than 200 billion dollars.