The World Bank said it may take five years for Japan to rebuild after this month’s earthquake and tsunami, which killed at least 8,450 and destroyed thousands of buildings.
“If history is any guide, real gross domestic product growth will be negatively affected through mid-2011,” the Washington-based lender’s staff said in a report today. “Growth should though pick up in subsequent quarters as reconstruction efforts, which could last five years, accelerate.”
“A temporary growth slowdown in Japan will have a modest short-term impact on the region,” according to the World Bank report. “Disruption to production networks, especially in automotive and electronics industries, could continue to pose problems. At this stage, it is unclear how the disaster will affect Japanese outward foreign direct investment, but it may dent the pace of overseas investment as the country’s focus turns inward on reconstruction.”
Japan’s financial systems are functioning without disruption and the impact of this month’s earthquake may not be as big as imagined, Naoko Ishii, the country’s deputy vice minister of finance for international affairs, said in a conference in Singapore today. Japan is “deeply committed” to its international financing programs, she said.
“The actual damage to the actual economic activities in the region is severe,” Ishii said. “When it comes to the overall economic impact of Japan, however, it may not be as large as we imagined. GDP share of the three most-affected regions is 4 percent of the Japanese total GDP and that region is not necessarily sitting in the industrial heartland.”
“If history is any guide, real gross domestic product growth will be negatively affected through mid-2011,” the Washington-based lender’s staff said in a report today. “Growth should though pick up in subsequent quarters as reconstruction efforts, which could last five years, accelerate.”
Bond Yields
The World Bank said that the 1995 Kobe earthquake and its aftermath may help gauge events following the March 11 magnitude-9 temblor and the ensuing tsunami. Liquidity injections by the Bank of Japan and appreciation in the yen, as traders abandon the so-called carry trade amid speculation overseas funds will be repatriated for reconstruction, are “combining to create downward pressure on bond yields,” according to the report.“A temporary growth slowdown in Japan will have a modest short-term impact on the region,” according to the World Bank report. “Disruption to production networks, especially in automotive and electronics industries, could continue to pose problems. At this stage, it is unclear how the disaster will affect Japanese outward foreign direct investment, but it may dent the pace of overseas investment as the country’s focus turns inward on reconstruction.”
Global Impact
The impact of Japan’s strongest earthquake on record may hurt global economic growth, Singapore’s Finance Minister Tharman Shanmugaratnam said in the city-state today.Japan’s financial systems are functioning without disruption and the impact of this month’s earthquake may not be as big as imagined, Naoko Ishii, the country’s deputy vice minister of finance for international affairs, said in a conference in Singapore today. Japan is “deeply committed” to its international financing programs, she said.
“The actual damage to the actual economic activities in the region is severe,” Ishii said. “When it comes to the overall economic impact of Japan, however, it may not be as large as we imagined. GDP share of the three most-affected regions is 4 percent of the Japanese total GDP and that region is not necessarily sitting in the industrial heartland.”
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