Some Economic and Trade Impacts of ブラック ジャック アプリarthquake, Tsunami and Nuclear Incident in Japan

It is more than seven weeks since the devastating earthquake caused the destructive tsunami which hit ブラック ジャック アプリast coast of Japan, resulting in the severe damage to the population and ブラック ジャック アプリconomic infrastructure. Damage to the nuclear facility at Fukushima has added to ブラック ジャック アプリconomic problems of the region and Japan in general. This report is aimed at understanding some of the impacts of this episode in Japan and in relation to Australia. The relevant data is still patchy and much of the impact has yet to be felt, but a range of indicators, analyses, projections and anecdotal evidence can provide a useful preliminary understanding.

Several issues can be addressed: the potential economic impact in the short-term, as production is affected by loss of power, damaged facilities and machinery, supply chain sensitivity and radioactivity concerns; related impacts on ブラック ジャック アプリxport and import of goods and commodities; the medium-term impact of rebuilding and supply-demand catch-up.

Complicating the analysis is the natural disaster which affected Queensland in early-2011, a combination of floods followed by a cyclone. These will have serious impacts on the tourism industry and the supply of food and coal from Queensland to Japan, quite separately to the Japanese disaster. Australian Treasurer Wayne Swan has connected these two events in a recent note. Treasurer’s Economic Note 3 April 2011, Impact of the Natural Disasters: “No one was ever under any doubt that the financial toll of the devastation we’ve seen in Queensland and elsewhere in Australia this summer was going to be substantial…Treasury estimates the cost to our economy will be around billion, with the vast majority of that being felt in the resources and agricultural sectors. Lost coal production could total billion, which is billion more than previously estimated. This largely reflects the fact that some of our big mines are still affected, and the impact on production is likely to extend into the June quarter. Damage to crops will be close to billion, and the loss of activity to the tourism industry is expected to amount to 0 million…As our second-biggest trading partner, ブラック ジャック アプリvents in Japan will also flow through to impact on our economy. Preliminary Treasury estimates show that ブラック ジャック アプリarthquake and tsunami will cut demand for our bulk commodity exports in the short term and likely slash around billion from export earnings in 2010-11. This could subtract less than ¼ of a percentage point from GDP growth this financial year, and comes on top of the ½ a percentage point impact from the floods and cyclone at home.”

The Australian newspaper (29 April 2011) notes that by ブラック ジャック アプリnd of April almost all the major coal producers in Queensland (BHP Billiton, Rio Tinto, Peabody Coal, Wesfarmers, Anglo American and Macarthur Coal) had lifted their declaration of force majeur. “Macarthur Coal is preparing to return to full production at its two central Queensland mines by ブラック ジャック アプリnd of June”, said the report. The means that some of the statistics from February until June would be unclear about the causes of any falls or increases in exports or imports. For example, soon after ブラック ジャック アプリarthquake, some shipments of coking coal were diverted because ports were closed in Japan. However, in recent times, there may be less coking coal demand due to the impact of supply chain sensitivities in the automobile and electronics industries. “Japan is a major supplier of high value-added parts and components as well as capital goods. ブラック ジャック アプリarthquake might cause supply disruptions for Japan’s exports to Asia, especially in ブラック ジャック アプリlectronics and automobile industries. Although on a small scale, there is some concentration of electronics and automobile industries in the most severely affected areas, namely, Miyagi, Iwate and Fukushima prefectures.” (Nomura International, March 18, 2011, Potential Impacts of Japan’s Earthquake on Asia).
Even though the area is small, the highly specialized ブラック ジャック アプリnterconnected nature of the supply chain means that a small disruption can have massive impact. “Although Toyota's 17 plants in Japan escaped the disaster relatively unscathed, factory lines are working at only half volume in Tokyo and at 40 per cent overseas as crucial suppliers in Japan's worst-hit areas struggle to restart operations. Toyota had indicated last week that its Japanese operations would remain at half-speed until June 3 but was unwilling to speculate beyond that. ブラック ジャック アプリt said on Tuesday that it would cut production at its North American plants by 75 per cent in the next six weeks to conserve its limited supply of parts made in Japan. The two other main Japanese car makers, Nissan and Honda, are also operating at only about half of normal production volumes in Japan.” (Sydney Morning Herald April 25, 2011).
“Furthermore, if automobile production falls, it would also affect related upstream industries such as steel, chemicals and electronics industries, as well as downstream industry such as retail. Thailブラック ジャック アプリs the most important hub for auto production in ASEAN with multi-tiered supporting companies supplying components to auto producers.” (Nomura Global Weekly Economic Monitor 21 April 2011).

Thailand is also important for Toyota in Australia as a provider of cars and parts. The further upstream impact would be on coking coal for making steel. The Nomura analysis expects almost full recovery in the automobile sector by ブラック ジャック アプリnd of June.
In contrast, a positive impact is expected on thermal coal demブラック ジャック アプリo substitute for some of the lost nuclear capacity. The Nomura analysis also states that “after thermal power plants were brought back on line on 15 April Tokyo Electric Power raised its forecast for capacity this summer from around 46.5mn kW to around 52.0mn kW, which implies a shortfall of around 5% versus peak demand. Factoring in household and corporate efforts to cut power consumption, we think major obstacles to economic activity, owing to power shortages, should be avoided this summer.” This means higher demand for thermal coal from Australia but also that the recovery of the manufacturing sector will not be hindered so much by power shortages.
The NAB Agribusiness Report March 2011 also states that “with a good proportion of Japan’s nuclear power plants damaged, Australia is likely to see a sharp rise in demand for thermal coal from Japan, which will likely push up prices.” Similarly the search for radiation-free food should see higher imports of beef and other foods from Australia, although the high A$ will see some of the demand being met by products from the USA.

In a personal correspondence, the head of an Australian food exporter indicated that the food chain in Japan has been compromised (perhaps limited to milk and vegetables) and in medium term that will lead to increased demand from reliable ブラック ジャック アプリrusted sources. This however needs to be tempered with the short term disruption to manufacturers ブラック ジャック アプリheir packaging suppliers unreliable utilities/power and disruption to logistics ブラック ジャック アプリhe usual barriers of import restrictions ブラック ジャック アプリariffs.
Another company, a Japanese exporter of food from Australia ブラック ジャック アプリmporter of foodstuff ingredients from Japan, also indicated that they have had no trouble in their shipments to and from Japan, neither from distribution nor from restrictions.

There has been some reported impact on Japanese exporters due to radiation fears. “Fear of radiation poisoning from Japanese products is forcing exporters to conduct extensive radiation tests on products being shipped overseas…By April 15, 120 companies had brought in 500 products and parts for testing. In only one case was possible radiation contamination detected. The reading fell after the product was wiped off. “Asahi.com 24 April 2011).
In Australia, the Australian Quarantine and Inspection Service issued the following item: (31-2011 - PROCESSING IMPORTED GOODS AND PASSENGERS ARRIVING FROM JAPAN (24 March 2011)): “Current advice from Foods Standards Australia New Zealand (FSANZ) is that the risk of Australian consumers being exposed to radionuclides in food imported from Japan is negligible. Australia does not import fresh produce from Japan. In fact, Australia imports very little food from Japan. Imports are limited to a small range of speciality products, for example, seafood, seaweed–based products, and sauces. As a precautionary measure, FSANZ has requested that the Australian Quarantine and Inspection Service (AQIS) tests certain fresh or frozen foods originating from the Japanese prefectures of Fuskushima, Gunma, Ibaraki ブラック ジャック アプリochigi. The foods are milk and milk products, fresh fruit and vegetables, seaweed and seafood (fresh and frozen).” As the release indicates, though there may be warnings about radiation the actual impact is expected to be very small if not negligible.

The Bank of Japan has revised its forecasts in the wake of ブラック ジャック アプリarthquake. It now expects 0.6% GDP growth in FY11 and 2.9% in FY12, essentially revising down this year’s forecasts by 1ppt and revising up next year by a similar amount. Macquarie Economic Research (29 April 2011) made a similar revision earlier and has GDP growth at 0.2% in FY11 and 2.0% in FY12.