Disaster to cost Japan US$235bn: World Bank

or 4,0 percent of output, and reconstruction may take five years, the World Bank said yesterday.
“If history is any guide, real GDP growth will be negatively affected through mid-2011,” the World Bank said in its latest East Asia and Pacific Economic Update report.
But growth should pick up in subsequent quarters “as reconstruction efforts, which could last five years, accelerate”, it added.
The lower end of the World Bank’s estimate of the twin disasters’ impact was US$122 billion, equivalent to 2,5 percent of gross domestic product (GDP).
Since the natural disasters struck on March 11, Japan has also had to grapple with a nuclear power plant crisis in Fukushima, but the World Bank did not mention the atomic issue in its assessment of the economic damage.
Japanese financial markets were closed yesterday.
On Friday, Japan and its fellow G7 rich nations vowed to intervene in currency markets to stem the yen’s rise and support Japan’s economy.
The dollar immediately strengthened after the move and was trading at 80.90 yen in morning Asian trade yesterday, up from 80.59 in New York last Friday.
Japan’s GDP grew 3,9 percent in 2010, when it was overtaken by China as the world’s second-biggest economy.
But Japan has been mired in a malaise for years, since a property bubble imploded in the early 1990s.
Vikram Nehru, the World Bank’s chief regional economist, said the Japan disasters would affect the rest of Asia but it was too early to give estimates of the cost to the region.
“In the immediate future, the biggest impact will be in terms of trade and finance,” he told reporters in Singapore.
The World Bank noted that after the 1995 Kobe earthquake, Japan’s trade slowed only for a few quarters, with imports recovering fully within a year and exports rebounding to 85 percent of pre-quake levels in the same period.
“But this time around, disruption to production networks, especially in automotive and electronics industries, could continue to pose problems (beyond one year),” the report added.
The World Bank said developing East Asia’s trade with Japan accounted for about 9,0 percent of the region’s total external trade in the past five years.
It estimated exports from the region could slow by 0,75-1,5 percent if Japan’s GDP shrank 0,25-0,5 percent.
The auto and electronics industries are already feeling the impact from Japan’s deadliest natural disaster since 1923, with production at major companies including Toyota and Sony disrupted.
Thai car exporters who buy Japan-made parts only have enough stocks to last until April while factories in the disaster-hit country are experiencing parts shortages sourced from the devastated northeast coastal region.
GM Korea, the South Korean unit of General Motors, plans to scale back production as it braces for a possible lack of Japanese parts, Dow Jones in Seoul reported yesterday.
In the electronics sector, prices of memory chips have shot up by more than 20 percent in some segments, the World Bank said. Japan supplies up to 36 percent of the world’s memory chips. – AFP.