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Impact Of Japan Earthquake

>> Tuesday, March 15, 2011

Firstly, my condolences goes out to all those affected by the disaster.

According to many economist, Japan is at serious risk of falling into a recession but will recover quickly, sparing the global economy a significant shock.

How bad will Japanese businesses be hit?
Many factories remain closed due to damage to roads and rails, disruptions of supply chains and limits on the supply of electricity. Overall GDP is expected to decline in the second quarter.

Who will pay?
Both insurers and the government start paying to rebuild roads, ports, factories and homes damaged or destroyed. Even though the Japanese government is already under massive debt of more than twice GDP, this may result in excessive borrowing.

What will the impact be on the global economy?
Some high-value goods, such as computer chips or specialized auto parts are only made in Japan, raising the possibility of some production disruptions.

The excess borrowing that the Japanese government is likely to take on to pay for reconstruction could drive up bond yields.

Well, it may be too early to determine the effects, but the nikkei has already dropped 6% on Monday and as of Tuesday morning, a further 5% drop.

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