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Daily View: What now for Japan's economy?

Clare Spencer | 10:21 UK time, Wednesday, 16 March 2011

A man watches a stock price board on a street Monday 14 March  2011 in Tokyo


Commentators discuss how the Japanese are coping after the earthquake.

Eamonn Fingleton predicts in the New Republic that the earthquake will hurt the global economy a lot. He gives the example of a fire at a small factory in Niihama which previously "sent shock waves" through the world because the factory produced a resin essential in making most semiconductors:

"Last week's destruction was greatly exacerbated by one of the biggest tsunamis in Japanese history, which destroyed everything in its path. Moreover, industry has changed dramatically in the last two decades. Technological progress and globalization have both tended to encourage increasingly specialized production. In a world where national markets are no longer protected, the toughest competitors with the newest production processes, as well as the most patient shareholders and bankers (like the Japanese), have tended to win - while others fall by the wayside, unable to finance the move to the next stage of technology. This concentration is risky: Because of it, the Niihama incident, in which a fire in a single Japanese factory brought an entire industry to its knees, could be repeated a hundredfold."

Anatole Kaletsky says in the Times that the combination of the tsunami, oil prices, European debt and conflicting monetary policy could prove deadly:

"What makes all these risks particularly frightening at present is that the world economy is still in a state of convalescence after the 2008-09 crisis and may be too weak to withstand any one of these shocks, never mind all four hitting together...
"The world today certainly faces a 'battalion of sorrows' but, like Hamlet, international leaders have a choice. They can do nothing and accept fatalistically that the world economy could go to hell. Or they can 'take arms against a sea of troubles and by opposing end them'".

The Telegraph's editorial argues the slump in stock markets around the world is irrational:

"While there are some genuine supply chain fears because of Japan's dominant role in manufacturing computer and car components, it is also true that the investment needed to rebuild the tsunami-ravaged regions will offer a sorely-needed fiscal stimulus. After the devastating Kobe earthquake in 1995, the economy rebounded strongly. Here, at least, is one potential silver lining to this baleful cloud."

The Economist suggests that global investors may return to Japan in the long term:

"Some of the market reaction to the situation is undoubtedly reflective of the uncertainty involved. So long as it isn't clear what the total cost of the disaster will be, markets will price in the possibility of the worst occurring. If the worst does not then occur, they'll snap back. And some of the market reaction to the situation is probably a panic generated by the sharp fall in share prices. That too is recoverable."

In the Financial Times Martin Wolf is convinced Japan can recover from the earthquake:

"It is in adversity that a country shows its mettle. The Japanese will surely do just that, on this occasion. It is for the leaders to match the mettle of the people. If they are able to do so, out of a great disaster may yet come a rebirth."

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