Japan Earthquake: Global Implications

Date: March 22, 2011
Pages: 35
US$ 1,295.00
Report type: Strategic Report
Delivery: E-mail Delivery (PDF), Download
ID: J486ED27022EN

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A Country In Crisis

The Worst Disaster Since World War ll

Japanese Prime Minister Naoto Kan has described the March 11 devastating earthquake and its aftermath as the country’s worst disaster since World War II. Indeed, it is likely that the latest quake will surpass the Great Hanshin Earthquake of January 1995 in terms of lives lost and damages incurred. Though several questions remain unresolved, including the scale and scope of a potential nuclear disaster, we have some thoughts on the main implications of the Tohoku earthquake. These range from the disruption to Japanese economic growth and markets, to the impact on commodity prices and the infrastructure sector.

A Tragic Human Toll: First and foremost, the human toll is severe. At least 6,000 people are known to have died and many thousands are still missing. Local authorities believe that the final toll could exceed 10,000, which would be greater than the 6,400 killed in the Kobe (Hanshin) quake of 1995. While the human toll is disastrous, the relatively positive news, if there is any, is that Japan is better placed than many other disasterprone countries to respond to the crisis. It has decades of experience with quakes, and considerable wealth as the world’s third largest economy. Japan’s social cohesion should help it withstand disaster of this magnitude better than many other countries, and there are no reports of a breakdown of public order in the affected areas.

Nonetheless, the Japanese authorities will be tested to the limits. On the political front, Prime Minister Kan may win a temporary political reprieve as he leads the national crisis response. Prior to the quake, Kan’s exit had seemed imminent. A swift and decisive response could win him plaudits, and indeed, he has already mobilised 100,000 troops–40% of Japan’s military–for rescue operations. By comparison, the government’s response to the 1995 Kobe quake was deemed slow and hamstrung by bureaucracy. Meanwhile, the participation of China and South Korea in the rescue efforts should boost goodwill between Japan and its neighbours, especially China. Bilateral relations have been strained by territorial disputes, which re-emerged in 2010.
A Country In Crisis
The Worst Disaster Since World War ll
chart: Devastating Impact
Japan - Key Nuclear Facilities And Quake Zone
chart: Topix Tops Out
Japan - Topix (LHS) & Daily Sector Performance (RHS)
Economic And Market Implications
After The Earthquake
Our Initial Thoughts
chart: Further Weakness In Store
Japan - Real GDP Growth (LHS) & Current Account (RHS)
chart: Still Favouring A Weaker Yen
Japan - Exchange Rate, JPY/US$ & Weekly RSI
Market Implications
chart: Topix Tops Out
Japan - Topix (LHS) & Daily Sector Performance (RHS)
chart: Good Near-Term Technicals
Japan - 10-Year JGB, % Yield
Industrial Implications
Construction Outperforms
Equities Nose-Dive
chart: Industry Suff ers, But Insurance Is Hardest Hit
TOPIX - Daily Performance of Sector Indices - 14 March 2011
Domestic Expectations
chart: Another Blow For European Insurance
S&P Insurance Index and Selected European Insurers (rebased to 03/01/2011)
chart: The Importance Of Diversification
Selected Australian Uranium Producers (rebased to 04/01/2011)
Global Sector-Specific Implications
Infrastructure Outlook
Reconstruction To Revive Dormant Industry
Fiscal Situation Problematic
chart: Revised Expectations
Japanese Construction Industry Value Real Growth (%) Forecasts
chart: Silver Lining?
TOPIX Construction Index Vs Nikkei and S&P Japan 500 Industrials Index
chart: Reconstruction Estimates boost Construction Stocks
Japanese Construction Equities, JPY, Tokyo Stock Exchange
chart: Short Term Boost, Long Term Question-Marks
Japan Infrastructure, Residential and Non-Residential Construction Industry Value Forecasts
Automotive Outlook
Production Loss Looms
Suppliers In North Hit Worst By Disaster
Shipping Outlook
Quake Devastates Japan’s Shipping Sector
Reconstruction Offers Upside Potential
chart: Long Term Upside Potential
Port of Nagoya throughput, tonnes ‘000
Six Seaports Out Of Operation For Months
Japanese Shipping Lines See Stocks Nosedive
chart: Quake Drives Prices Down
MOL stock prices, 3 months
Oil & Gas Outlook
LN G Imports To Rise
Tsunami Hits Energy Infrastructure
chart: More LNG Needed
Japan’s 2009 LNG Imports By Country (bcm)
Biggest Earthquake On Record
chart: Back To Black?
TEPCO Power Generation, By Capacity, mn kW
Energy Market Impacts
chart: Upside Risks
Japan’s Oil Consumption, Refining Capacity And Product Exports
Emergency Operations
Agricultural Outlook
Short-Term Import Slowdown
Medium Term Demand To Hold Up
chart: Aff ecting Agriculture
Japan - Agriculture Map & Tohoku Earthquake Epicentre
Short-Term Impact: Lower Imports, Higher Prices
Assessing The Damage
chart: Agriculture Suff ering The Most
TOPIX - Performance of Sector Indices (March 11-16, 2011)
Negative Short-Term Impact On Global Markets
Medium Term Impact: More Imports Of Meat, Key Grains
chart: Hitting The Grains
Normalised Grains Spot Prices
Long Term Impact: Fall In Agriculture Productivity, Demand Destruction
table: Japan - The Big Food Importer
Agriculture products: Corn, Pork, Cheese, Beef, Barley, Poultry, Wheat, Soybean, Rice
chart: More Grains, Less Meat In Future?
Japan - Income Elasticity of Selected Agriculture Products
Risks To Outlook
Global Nuclear Power Outlook
Fukushima Nuclear Meltdown
Questions On Its Legacy
chart: Sentiment Changes Against Nuclear New Builds
Number of nuclear reactors under construction
chart: Reacting To Japan
Global Utilities Indices/ Utitility Stock Prices Normalised as of March 1st 2011
chart: Further Downside Until The Leak Is Contained
Japanese Utilities Companies Stock Prices, Normalised As of March 1st 2011
Asia Development Aid Outlook
Japanese FDI For Infrastructure In Jeopardy?
Major Projects Could Be Hit
chart: Earthquake Likely To Weigh Down FDI
Japan’s FDI Outflows Into Asia, 2010 Provisional, US$mn
country: Bangladesh, India, Indonesia, Thailand, Vietnam
Australia Economic Outlook
Iron Ore And Coking Coal Shipments To Suffer
Recovery Expected In 2012
Silver Lining Seen In Natural Gas, Thermal Coal
chart: A Mixed Bag
Australia - Exports To Japan By Product, % Of Total Exports To Japan
Reconstruction To Further Improve Trade In 2012
Indonesia Economic Outlook
Implications Of Japanese Earthquake
FD1 To Take A Hit
chart: All Ab out Commodities
Indonesia - Breakdown Of Exports To Japan, % Total Exports To Japan
Japanese Demand: Impact Only Temporary
chart: Losing A Big Investment Supporter?
Indonesia - Foreign Direct Investment, US$mn
FDI: Tempering Expectations For 2011
Philippines Economic Outlook
Reverberations Of The Japan Quake
Aid And Trade To Suffer
chart: Non-Essential Goods Demand To Take A Hit
Philippines - Breakdown Of Philippine Exports To Japan, % Of Total Exports To Japan
Exports: Slowed By Japan
chart: FDI From Japan May Drop
Philippines - Breakdown Of 2010 Inward FDI, %
Losing Japan’s Financial Might
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