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How will Japan finance its reconstruction?

Robert Peston | 09:06 UK time, Monday, 14 March 2011

Trying to make an assessment of the economic and financial costs of a disaster such as the Japanese earthquake and tsunami always seems tawdry.


Earthquake damage (AP)

But failure to do so is also to succumb to mawkishness or despair. Life goes on, markets continue to trade, investors put a price on the damage done.

Overnight, investors have wiped 6.2% off the value of Japanese shares on average, as measured by the Nikkei 225 index. And the value of some of the best known and most powerful Japanese multinationals fell more: Sony fell 9.1%, Nissan dropped 9.5%, Toyota was 7% lower, the banking group Mizuho was 10.5% down.

Goodness only knows whether that is a rational response, whether that represents an efficient calculation of the long term damage or a manifestation of blind investors licking a finger and holding it to the wind.

Breweries are shut. Pretty much all automotive manufacturing has been suspended. Sony has closed six component plants. Power across the country is being rationed. There is enormous short and long term uncertainty about the impact of the nuclear debacle on health, the environment and the security of power supply.

Already Nomura - the largest Japanese investment bank - is forecasting that the disaster will delay a recovery in the Japanese economy by about six months (Japan's economy contracted in the last quarter of 2010, having grown strongly earlier in 2010; Nomura had been predicting the country would emerge from this dip in the second quarter of 2011, but now says a return to better conditions probably won't happen till nearer the end of the year).

Even so, Nomura does not anticipate a major slump in share prices. Here is its logic:

"Although we expect this earthquake to provide further impetus to the correction in Japanese equities that has been occurring since mid-February, we do not envision a serious correction for the following reasons.

"First, industrial production only fell in the immediate month following the Kobe earthquake (in 1995). Second, the government is likely to provide fiscal support to the regions affected. Third, we see little risk that the earthquake will trigger a sharp rise in the value of the yen."

As for another important bit of the economic infrastructure, the banking system, the Bank of Japan has done what it can to maintain its integrity and keep the cost of finance as low as possible, by making £165bn of credit available to financial institutions, almost five times the liquidity it provided after Lehman's collapse in 2008.

So the potential for a seizure of the banking system has been minimised.


Collapsed brewery, Sendai, Japan (AP)

The greater financial risk for Japan is probably in its bond market, because Japan famously has the largest national debt relative to its economic output of any of the major developed economies together with a large and unsustainable fiscal deficit.

According to IMF figures, the ratio of general government gross debt to GDP was set to reach 228% this year, and 233% in 2012, even before taking any account of the costs of reconstructing the area devastated by the quake and tsunami. The gap between government revenues and expenditure for 2011 is forecast at more than 9%.

Which is why the credit rating agency Moody's warned this morning that the natural disaster could bring forward the moment of a potential financial calamity, which would be the moment when investors lose confidence in Japan's ability to repay its debts.

The sum that Japan needs to borrow this year is the kind of number that boggles the brain: if you add together both the maturing debt that needs to be repaid and new borrowing to finance the deficit, Japan needs to borrow around a third of its $5.5 trillion GDP, excluding very short term debt, or more than half its GDP including short term debt.

These are the sort of numbers that make the British public-sector balance sheet look like a model of strength and prudence.

But although the Japanese government's credit rating has recently been downgraded, historically this is a country that has proved able to raise these sums - largely because the vast bulk of government borrowing has been financed by Japanese savers and domestic institutions who simply have a habit of lending to the state.

Japan is far less dependent on the vagaries of the sentiment of overseas investors than most big borrowers, such as the US.

In the current circumstances where Japanese people and institutions face a huge test of their resolve, they may be more determined than ever to lend to the government - as an act of solidarity, as a tangible sign of the collective will to reconstruct their country.

But even so, the Japanese government is in a hideous position, under pressure from markets to cut borrowing at just the time when the imperative of rebuilding the country will require a massive deployment of government money.

Update 09:45: In respect of the financing of Japan's big deficit and the refinancing of its massive existing debt, the Bank of Japan is doing all it can to avoid damaging disruption.

As well as pumping liquidity into the banking system, it has doubled its quantitative easing programme to purchase financial assets - including Japanese government bonds - from Y5 trillion to Y10 trillion ($121bn, £76bn)

Interestingly Nomura believes Japanese bond prices could actually rise in the short term, because of these bond purchases by the central bank and because of a switch out of assets perceived to be riskier by investors.

Nomura thinks this strength in bond prices is unlikely to last more than three months

Also, Nomura's chief economist Takahide Kiuchi said - in a conference call with investors this morning - that he expects the quake and disaster will contribute to a contraction in the Japanese economy of between 1% and 1.5% in the three months to the end of June.

He forecasts that the Japanese economy will recover from its "lull" in the fourth quarter of this year.

Update 12:57:I have just spoken to Peter Westaway of Nomura. He made three points.

  1. Nomura believes the negative impact of the natural disaster - estimated at between 1% to 1.5% of GDP in the second quarter - will mean that the GDP will be flat in the coming few months, but should not contract.
  2. There is a massive amount of uncertainty around that forecast - because the scale of government stimulus is uncertain, the impact of the nuclear accidents can't be assessed yet and consumer spending may fall by more than expected.
  3. He expects the rating agencies - Moody's, Fitch and S&P - to "cut Japan some slack" for "humanitarian reasons". Or to put it another way, as and when the Japanese government deficit grows because of the costs of reconstruction, they will not downgrade Japan's credit rating - unless (I suppose) it became clear that the Japanese government had abandoned all hope and intention of restoring the health of the public finances. Or to put it another way again, the credit rating agencies would not wish to be seen to be triggering a fiscal crisis, as the aftershock of a national tragedy.


Comments

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  • Comment number 1.

    "The greater financial risk for Japan is probably in its bond market, because Japan famously has the largest national debt relative to its economic output of any of the major developed economies together with a large and unsustainable fiscal deficit."


    There is nothing unsustainable about Japan's deficit.
    And don't worry about the country either. It will be business as usual quite soon.

  • Comment number 2.

    I think we have to ask the question why so many people live in such a small area, that has the potential to bit hit by extreme events like this. Would it be wise to invest in this area in the future?

  • Comment number 3.

    You raised a wry smile with you pointing out "Breweries are shut" Robert! Mind you in these trying times I guess many Japanese could do with a drink and I would like to offer my sympathies to them. As to the stock market forecast from Nomura there is quite a moral hazard in a Japanese broker telling us things will be okay...

    I saw a good blog post on Japan's economy and its likely prospects from this horrible event by the economist Shaun Richards which amongst other things pointed this fact out.

    "We of course do not yet know how badly this particular facet of the crisis will play out but in culture where the word for yes hai can mean both yes and yes maybe and the underlying importance of loss of face means that the Japanese authorities are very unlikely to be telling us the truth about the real situation."
    http://t.co/LW6rO7e

    As I review the news this morning it looks like he is already being proved correct by the fact that there has been another explosion at a nuclear site in Japan.

  • Comment number 4.

    RP: "the impact of the nuclear debacle on health..."

    Debacle? That's a fairly gauche take on affairs, isn't it?

    As much as any engineer might try and build in fail safes for seismic shocks into constructing a nuclear plant, by all accounts, the sheer scale of this weekend's earthquake has been so extreme as to render them worthless.

    Off point, I appreciate, but it annoyed me to read that!

  • Comment number 5.

    See the positives Robert. It will be extremely difficult for decision makers to dodge their responsibilities. They will have to bite the bullet and commit to long-term infrastructure. Unlike here in the West where no-one seems to have the borlz to do anything along those lines and kicking an empty champagne bottle and caviar tin down the road has become an art form.

  • Comment number 6.

    Overall I would not bet on Japan failing to pay its debts, to write the nation off would be foolish. Recovery will come but first clear up and wait for the aftershocks then recover better than before

  • Comment number 7.

    No big deal in finding the funds to reconstruct then... The Bank of Japan will pay for it. Simple stuff. To those who fear that the cash injection will devalue the Yen, think again. Japan sees this as their best opportunity to achieve a devaluation without being accused of causing a currency war.. The fear of deflation will also reduces dramatically. With regard to supply chain problems.. China is ready and able to supply everything immediatley. My advice: Buy Japanese stocks now... and Chinese I suppose

  • Comment number 8.

    Japan's sovereign debt position puts into context the obsession of the Coalition with attempting to reduce the deficit which I think is ultimately self defeating and terminal for the current political hybrid at Westminster. Perhaps the sense of unity in Japan has something to do with the fairness of the remuneration in industry.

    Building nuclear power stations in an earthquake prone area within in a country that uniquely understands the destructive power of the material is a monumental paradox. Another lack of contingency planning (after BP) is that it appears the plant generators weren't Tsunami proof just quake 'proof'!

  • Comment number 9.

    As you state the Japanese people provide the cash for its sovereign debt and its reckoned that the affected area only accounts for 3% GDP.

    The issue for the moment is not the earthquake but the out of control nuclear reactors.

    Assuming the above is controlled , from a financial perspective the Japanese will soon be back on its feet, they know how to graft...


  • Comment number 10.

    Underneath the economic and demographic drivers for history, in the last 200 years it has often been about the effective application of cheap energy and innovation in finding various supplies of this.

    The major effect of this earthquake beyond the personal tragedies may be to make the cost of energy even more expensive than it would otherwise have been by raising doubts about nuclear energy as a possible element in the potential energy mix.

    Maybe the Bank of Japan will be able to print enough yen to burn to create the energy to power the recovery if nuclear generation comes under sufficently strong pressure to curtail further development.

  • Comment number 11.

    I'm no expert in big multinationals, but not all of Japans manufacturing is in Japan, let alone in the region affected. I suspect that the share price falls are an over-reaction. How much of the profit from overseas arms of the big Japanese manufacturers now gets spent on rebuilding in Japan is going to be important - investment elsewhere may well shrink but I expect that Japan will emerge even stronger. It will probably take a good few years though.

  • Comment number 12.

    As awful as it probably sounds, a lot of companies / people will make a lot of money out of the reconstruction of the country so for corporates is not entirely bad, every yen spent on restructuring is a yen on somebody's P+L. The Japanese have a history of rebuilding after events both manmade and natural so are better placed than anyone to come through this. Though the situation is incredibly dire, a direct hit nearer Tokyo area could have dwarved the current situation.

    This issue highlights the historical problems that Japan faces which is lack of fossil fuels and lack of habitable land relative to population size. The irony being that one of the countries most abused by atomic power in the past is also one of the most reliant on it. Similarly, one of the countries most at risk from natural disaster has to live in close proximity to the threat of it.

    No wonder the Japanese are so spiritual / superstitous when their country / livelihoods more than most are at the whim of the powers outside of human control.


  • Comment number 13.

    One thing's for sure. There will be some dirty "City" bankers this morning trying to figure out how to exploit this situation for their own benefit.

    I'm not joking, either. That's how low those guys have fallen.

  • Comment number 14.

    Japanese people are one of the most hard working people. They will recover soon!

  • Comment number 15.

    Hmm.

    ''Life goes on....''. Or is that L.I.F.E.G.O.E.S.O.N.??
    On red,... (alert)?
    On black,...?
    On zero,...?

    I suppose there are some people (still alive) who think they(Japan) will simply play ''catch up''.

    If I was a financier, I would be worried that the Japanese became disheartened or changed their ways.
    Of course, this may be all for the better if a new life brought gretaer benefits.

    A lot of talk is about there being ''no option'' other than nuclear energy.
    This worries me. No imagination, lack of leadership and the future prospect of repeated mistakes.

    I wouldn't want the Japanese to build themselves, another home-made ''Godzilla''.

    Whilst the world charts a new course and Japan becomes adapted to a new position, this disaster will have left a pernament mark.
    Loss of memory may erase much of the shock and other effects, if one can see it in the first place.
    If the Japanese loss confidence in themselves, the rest of the world may lose confidence in Japan's economic prospects.


  • Comment number 16.

    Here we go. I wondered how long it would be before the suits started counting the economic costs. Obviously they couldn't wait until all the bodies had been counted.
    If anyone had failed to notice, there has seemingly been many 10's of thousands of deaths in this disaster, and there is a devastating and ongoing impact on the daily lives of ordinary Japanese people. So what's a few billions in the scheme of things? Yet this morning the BBC rolled out the usual suspects on to TV and Radio, trotting out the same guff about share prices, debt, growth blah blah. It makes you sick.

  • Comment number 17.

    All seems to me to hinge on the outcome of the nuclear crisis.

    If there is an eventual massive release of contamination a large part of Japan could become uninhabitable, and it's already crowded enough.

    The fact that, as far as I can see, the BBC has only given a platform to those nuclear experts with an interest in, or connection to, the nuclear industry does not speak well for it in my view.

    It is, for instance, only now becoming clear to most people that a reactor cannot, once in full operation, have its generation of heat turned off, whether fission is stopped or not.

    That seems to me to be something they have managed quite effectively to keep out of the general public's mind for all these years, and this new information will now inform people's attitudes, rightly, to the proposed nuclear renaissance in this country and around the world.

    People will now begin to lay at the door of capitalism the charge that it is bent on having its way, whether that involves giving a large proportion of us, particularly our children, cancers such as leukaemia, or not.

    There may well be a similar awakening in Japan, and this will have to be factored in before forecasts of any sense at all can be made.

  • Comment number 18.

    Easy pickings when things like this happen. I shorted every Japanese stock I could when I heard the news on Friday.

  • Comment number 19.

    The comments by so called economists about the impact of this tragedy have been despicable.

    When these events happen and they would do far better to keep their mouths shut rather than, yet again displaying their ignorance about macro-economics.

  • Comment number 20.

    It is not a question of how can the Japanese government afford to rebuild, it is a question of how can they afford not to do so.

    It is clear that, as usual, the parasites who operate the 'financial markets' are so obsessed with their own self-interest that they have lost sight of the fact that if the entire world economy collapses they will have absolutely nothing to 'trade' with...

  • Comment number 21.

    Lindsay, post 18,

    I really hope that was a lame attempt at humour. Because if that really was your first thought when you saw what was happening, I feel sorry for you.

  • Comment number 22.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 23.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 24.

    I've no doubt that the Japanese will sort themselves out sooner than we think. Unlike the UK they are intensely patriotic and highly industrious so I'd rate their chances of making a pretty complete recovery by the end of the year as pretty good.

  • Comment number 25.

    "16. At 11:04am on 14th Mar 2011, davidbrent wrote:
    Here we go. I wondered how long it would be before the suits started counting the economic costs. Obviously they couldn't wait until all the bodies had been counted.
    If anyone had failed to notice, there has seemingly been many 10's of thousands of deaths in this disaster, and there is a devastating and ongoing impact on the daily lives of ordinary Japanese people. So what's a few billions in the scheme of things? Yet this morning the BBC rolled out the usual suspects on to TV and Radio, trotting out the same guff about share prices, debt, growth blah blah. It makes you sick.

    "

    Hear hear mate.

  • Comment number 26.

    The last time there was a financial crisis in Japan they cut the budget the way 'we' are currently doing, and ended up with "The lost decade". I can only hope that one good thing to come out of this tragedy will be that the enforced action to do the opposite should prove once and for all that in macro economics investment in a nation that is better than cut backs.

    Meanwhile, if the scum of the earth could please stop trying to find a way to exploit the deaths of fellow human beings in order to get a quick buck...

  • Comment number 27.

    The yen will go south against the US dollar and all those other major currencies. Then the guys will work their socks off like they always have done and seek to export their way out of trouble.

    We will fool ourselves as usual as we see all these cheap gadgets flooding our shops.

    Only the Chinese had better watch out as they seek to upgrade their economy!

    In the medium term this could be the saving of the Japanese economy.

  • Comment number 28.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 29.

    I was surprised that they even opened the markets this morning, we would be far better off if all the experts were drafted in and use their enormous skills to help those in need.

    Of course our Banking experts on Thursday would probably tell you that a disaster like this is mathematically impossible, the nuclear plants payout too high a wages, and are over manned and the pensions they receive are too generous.

    The horrendous scenes we are seeing would prove them wrong on all counts.....

  • Comment number 30.

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  • Comment number 31.

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  • Comment number 32.

    After their abysmal performance leading up to the financial crash in 2008, why should we set any store by what Moody's say? The views of a ratings agency that gave dodgy mortage bonds a triple A rating (the same rating that General Electric have...) carry as much weight as those of Homer Simpson.

  • Comment number 33.

    26. At 11:26am on 14th Mar 2011, Leviticus wrote:
    Meanwhile, if the scum of the earth could please stop trying to find a way to exploit the deaths of fellow human beings in order to get a quick buck...

    - Are you saying undertakers are the scum of the earth? Or florists? Or greeting card manufacturers?

  • Comment number 34.

    16. At 11:04am on 14th Mar 2011, davidbrent......

    Couldn't agree more.

    There also seems to be an almost lascivious desire for a massive death toll in order to 'truly' portray just how 'big' this disaster is. When did the BBC turn into this? I've not lived in Britain for well over a decade now & as such haven't had access to News 24 etc until the live feed available to the rest of the world was established to cover the eartquake/tsunami. I tuned in thinking "the BBC will tell me what's going on, in a sober & impartial fashion"....ha, what a surprise I got. Shame on you BBC, you've become Fox News as far as international broadcasting is concerned & employing reporters who attempt to add gravitas through hackneyed expressions delivered in faux-concerned voices while charging around looking for the next weeping mother or story of maximum misery is sickening.

    As for the Japanese nation & people, they survived & prospered after WW2, they survived the Asian Crisis of the 90's & stagflation, they'll come out of this stronger & richer....stop looking for the next disaster already....."How will they pay for this???" Imo...by working hard, investing their money in Japan & continuing to export cutting edge technology & ideas to the rest of the world as they have for the last 50 years.

  • Comment number 35.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 36.

    The Japanese will have trouble coping with the human disaster, but life will go on and financially I am confident they will manage it - if the younger generations have the same qualities as the older ones. However, I'd be more worried about the OTHERS that need money, because as the Japanese have obviously much better to do with their own money, I don't see them buying US Treasuries or Euro bonds.

  • Comment number 37.

    >33. At 11:52am on 14th Mar 2011, Lindsay_from_Hendon wrote:
    26. At 11:26am on 14th Mar 2011, Leviticus wrote:
    Meanwhile, if the scum of the earth could please stop trying to find a way to exploit the deaths of fellow human beings in order to get a quick buck...

    - Are you saying undertakers are the scum of the earth? Or florists? Or greeting card manufacturers?



    Exploit
    Quick Buck


    If you can't tell the difference between setting up a skilled long term business intering the dead and shorting stocks to make money out of misery then I can only assume Dante has a specific level set aside...

  • Comment number 38.

    Japan will likely recover, we shall hope, but how the world will manage it will depend critically on the magnitude of a disaster which is far from being assessed. The greatest crisis is still continuing. Our thoughts, hopes, and prayers are with the people of Japan and must especially be with with the emergency response teams at the Dai-ichi and Fukushima Daini nuclear power complexes who are struggling to contain a potential ecological and economic disaster of world magnitude - one that could dwarf the present earthquake and tsunami damage and loss of life assessments into grim and pale insignificance. Let us first attend these critical events before drawing our post-mortum economic and political assessments.

    (I'm an American who greatly appreciates the BBC and thanks Mr. Peston for his article.)

  • Comment number 39.

    "According to IMF figures, the ratio of general government gross debt to GDP was set to reach 228% this year, and 233% in 2012, even before taking any account of the costs of reconstructing the area devastated by the quake and tsunami."

    "When investors lose confidence in Japan's ability to repay its debts..."

    "The Japanese government is in a hideous position..."

    "As well as pumping liquidity into the banking system, it has doubled its quantitative easing programme to purchase financial assets - including Japanese government bonds - from Y5 trillion to Y10 trillion ($121bn, £76bn)"

    What a stoic nation! What a proud and organized nation!!

    I have only one question to ask, and it is this:
    When does it become humanitarian, when does it become compassionate, for all holders of Japan debt - wherever they may be, whoever they may be - to forgive their holdings of Japanese debt, or if Japan be too proud to accept forgivenes outright, renegotiate the interest?
    77 Nationas have made pledges of assistance, but we all know what happens with pledges: Either some dribble dribbles through or the plegde is soon forgotten...but debt forgiveness, interest renegotiation, these are real economic assistance and of immediate effect.

  • Comment number 40.

    29. At 11:35am on 14th Mar 2011, AqualungCumbria wrote:
    "...The horrendous scenes we are seeing would prove them wrong on all counts...."

    ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
    Indeed, A.

    It has to be remembered that those battling heroically at the plants probably lived in the tsunami stricken areas, and so in the knowledge they may well be the only survivors from their families.



  • Comment number 41.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 42.

    @21. At 11:15am on 14th Mar 2011, FiftyYearsofHurt wrote:
    "Lindsay, post 18, I really hope that was a lame attempt at humour. Because if that really was your first thought when you saw what was happening, I feel sorry for you."

    Please do not feed the troll.

  • Comment number 43.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 44.

    39. At 12:25pm on 14th Mar 2011, BluesBerry

    The only 'debts' the Japanese Govt has are the private savings of its citizens. There is no, repeat no, financial constraint on the Japanese Govt to start recovering from this.

    In fact the opposite is true. The jobs and the work generated as a result of the clear-up will create growth and income.

    God knows what excuses the UK Govt would come up with , for doing nothing, if a similar event were to happen in the UK.

  • Comment number 45.

    38. At 12:23pm on 14th Mar 2011, Wamba wrote:

    Our thoughts, hopes, and prayers are with the people of Japan and must especially be with with the emergency response teams at the Dai-ichi and Fukushima Daini nuclear power complexes who are struggling to contain a potential ecological and economic disaster of world magnitude .

    Well said,

    As for Lindsay_from_Hendon there is a difference between providing a service at a reasonable cost and exploitation you seem to have these things confused.

  • Comment number 46.


    As far as I can tell Robert is just about the only BBC reporter not actually in Japan.

  • Comment number 47.

    "How will Japan finance its reconstruction?"

    Can't it bring out one of those photocopiers like Ben Bernanke, Mervyn King and Robert Mugabe have? Turn the handle and print off a few billion yen notes?

  • Comment number 48.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 49.

    Robert: The biggest current issue is not the share prices, not the bond market, not Japan debt to GDP ratio but the fate of its people and the fate of the stricken nuclear power stations & the potential threat these pose not just for Japan but the region if they have a total melt down.
    Japan re-built itself after WWII and Im sure its people in time will do the same again as long as radiation polution does not seriously affect the area of devistation in the worst case senario.
    The West can help immediately by providing nuclear experts & any equipment that could help stabilise the reactors not as one NZ paper did at the weekend just think about itself if the reactor had complete failure and whether the fallout would affect them. This is more than a Japanese problem its a global problem one we all need to help resolve including the clean-up and reconstruction of the area when the after-shocks subside.
    Lets for one day forget about the markets.

  • Comment number 50.

    @ 42. Stuart Wilson

    > Please do not feed the troll.

    Made me chuckle.

  • Comment number 51.

    39. At 12:25pm on 14th Mar 2011, BluesBerry wrote:

    "The Japanese government is in a hideous position..."

    i couldnt agree more, and IMO the correct respose should have been to stop trading on the Japan exchange..... i cannot see how it is helping the situation at all and diverting attention away from the main situation.

    The only people to benefit are the Lindsay_from_Hendon's of this world and they are no loss at this time.The saving in electric alone would be of a greater help to many more deserving people.

  • Comment number 52.

    How will Japan finance it's reconstruction? is the title of Robert Peston's blog.

    Our family's donations to humanitarian relief for Japan have been given in equal measure to any part of the world affected by the impact of a natural disaster.



  • Comment number 53.

    "At 12:25pm on 14th Mar 2011, BluesBerry wrote:
    What a stoic nation! What a proud and organized nation!!

    I have only one question to ask, and it is this:
    When does it become humanitarian, when does it become compassionate, for all holders of Japan debt - wherever they may be, whoever they may be - to forgive their holdings of Japanese debt"

    I have nothing but sympathy for Japan in respect of the earthquake, but I wouldn't call them "organized" to have run up the biggest debt in the world.

    Most Japanese debt is held by Japanese citizens so it's up to them really if they want to forego their life savings to bail out their own government's half century of overspending.

  • Comment number 54.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 55.

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  • Comment number 56.

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  • Comment number 57.

    "Life goes on, markets continue to trade, investors put a price on the damage done"

    Yes indeed. 2 further points;

    1) what will they rebuild ? more nukes ? or will they, and others, review the role of nuclear in the power-generation mix, now and in future ?
    Dash-for-gas Part 3 looks increasingly likely.
    http://cityunslicker.blogspot.com/2011/03/new-politics-of-nuclear-power.html

    2) What impact will the huge reconstruction programme have on already-booming commodity prices ? When China rebuilt after its own 2008 earthquake disaster it had a huge impact on the steel / ore / transportation markets

  • Comment number 58.

    51. At 12:50pm on 14th Mar 2011, AqualungCumbria wrote:
    i couldnt agree more, and IMO the correct respose should have been to stop trading on the Japan exchange..... i cannot see how it is helping the situation at all and diverting attention away from the main situation.

    - That's because you don't understand how it works. If they suspended trading, the decline would be all the greater as investors feel even more nervous.
    Hopefully this disaster will make governments reassess their nuclear policy and start to invest in fossil fuels again. I appreciate that the oil supply has been weakened by events in Libya but it looks like the government is restoring power and control there so hopefully the pipes will start to flow again.

  • Comment number 59.

    Wars and disasters have always provided golden opportunities for vast fortunes and profits to be made at the expense of individual victims, communities and countries.
    Does not the equation of costs-profits have to balance?

  • Comment number 60.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 61.

    #58 "Hopefully this disaster will make governments reassess their nuclear policy and start to invest in fossil fuels again. I appreciate that the oil supply has been weakened by events in Libya but it looks like the government is restoring power and control there so hopefully the pipes will start to flow again."

    Cheap oil is running out. Coal fired power stations are affecting global warming. You sound like another investor who has no a clue what they are investing in or its relationship with the real world. Have you been in a coma for the last 40 years?

    Not only that you seem to lack common decency.

  • Comment number 62.

    The Boj "pumped" money--£114bn to be exact--into the markets to "calm" them. Basically, what this means again is that once again, a Central Bank is defying not only the after-effects of greed and exuberance, but now they are flying in the face of mother nature in the desperate quest to never have a bear market in stocks.

    The FED pumps money, Boe pumps money, Ecb pumps money and the Boc pumps money. Collectively, these institutions have printed trillions in paper money to throw on the pyre of paper that threatens to derail the entire financial system, because they believe that their collective wisdom, attained from textbooks and ivy league institutions makes them collectively superior.

    By the end of 2012, the ridiculousness and futility of all these CB actions will be exposed and there will be anger. The obsession with GDP and capital markets, above all else will be shown up.

    The Boj would've been wise to redirect the £114bn to more worthwhile causes.

  • Comment number 63.

    re building commodities,

    Japan is a major importer of tropical hardwoods, not all of it legal (approx 10% illegal in 2008 accroding to Chatham House report).

    Would hope they recycle as much wood / materials as possible from damaged homes, but not sure if this would be socially / spiritually acceptable in Japan?


  • Comment number 64.

    Interesting piece, but why has Robert written this, as Business Editor, rather than Stephanie, the Economics Editor? I see she has now written a blog on this, but the issue is long-standing; i know sometimes the distinction is blurred between the two areas (in which case just make them both 'Business and Economics Editors') but as things are, its been clear for some time that Robert is just pushing in on economics-related topics benefiting from his news media celebrity (thanks to that delivery of his).

  • Comment number 65.

    Always understood that Japan's greatest problem was getting it's population to actually spend to get out of it's stagflation problem. It may be the one benefit from this disaster in that people will have to spend and possibly give the domestic economy the boost that is required. I stress I am not an economist, only take a pssing interest in these things and that my understanding is probably out of date

  • Comment number 66.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 67.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 68.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 69.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 70.

    61. At 13:26pm on 14th Mar 2011, United Dreamer wrote:
    Cheap oil is running out.

    - A peak oil theorist! As the supply decreases what happens? That's right the price increases. There's more than enough left for me. Iraq still has large untapped reserves.
    Coal fired power stations are affecting global warming.

    - Global warming? Are we still going on about that? It is a fraud circulated by communists who want the people to behave the state.
    You sound like another investor who has no a clue what they are investing in or its relationship with the real world. Have you been in a coma for the last 40 years?

    - The underlying assets are important, but they're not everything.

    Not only that you seem to lack common decency.

    - Was that you? I'll draw the curtains next time.

  • Comment number 71.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 72.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 73.

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  • Comment number 74.

    I'm really tired of the BBC's neglect of their role as a public educator in that its commentators only ever promote the neo-liberal view of economics; a view incidentally that has essentially got us in the mess we're all in. There are other alternative analyses which give much better descriptions of what's happening in the world and what the remedies are.
    Specifically in this case, the Japanese government, via its central bank, is sovereign in its own currency, so it can spend what it likes to begin to repair the damage from the earthquake (subject to there being goods and services to buy; before anyone mentions inflation risks). It doesn't need to borrow or tax to generate yen. What the bond 'markets' think is irrelevant.
    The only realities here are the nightmare the Japanese people themselves are facing and, if you insist, the shock to production while things are rebuilt.

  • Comment number 75.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 76.

    67. At 13:50pm on 14th Mar 2011, ukblahblahblacksheep wrote:
    This 'something' you found out about is something that has resulted in massive death and destruction.

    - No, the something WAS the massive death and destruction. But, and please bear this mind, I didn't cause the tsunami. I just profited from it. What's wrong with that?
    When you 'chose to do something' you simply chose to line your pockets.

    - What's wrong with that? You want me to fly there and dig? They don't want volunteers. This has reawaken my feelings towards the Japanese market, let's face it we've ignored them for so long. They'll probably do quite well out of this. Please remember, I didn't cause it.

    I find your attitude beyond sad, verging on evil..... still, all hail the free-market eh? Just don't ever catch fire when the only person around to put you out is me .....

    - I will bear that in mind "Don't catch on fire when only ukblahblahblacksheep is around." Do you mind if I try to avoid catching fire all of the time?

  • Comment number 77.

    #72 DavidBrent - the financial benefit lies with those with fewest scruples. While most would hesitate while contemplating the human tragedy afoot, those who care not one jot will be figuring out what's in it for them without delay.

  • Comment number 78.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 79.

    68. At 13:51pm on 14th Mar 2011, AqualungCumbria wrote:
    How could the decline be greater if people are unable to speculate ???, they would have to sit tight perhaps nervously, but await a time they are able to trade again.By which time government measures would be in place and a clearer picture emerge.

    - The tension builds up, suspending for a few days isn't long enough to see if government measures are working. People panic, it's their bonuses or life savings on the line so they sell at any means. Do you remember Michael Fish's not a hurricane? Well that closed markets so they went berserk when they were able to get back in. It's known as Black Monday.

    http://en.wikipedia.org/wiki/Black_Monday_%281987%29

    as i am quite blind to what actually traders do, perhaps you can enlighten me and tell me just what benefit is being derived for the people most affected by this from having the markets open and speculation being rife.

    - I'm not a trader but I do trade. How about stamp duty?

    69. At 13:51pm on 14th Mar 2011, Jacques Cartier wrote:
    60. At 13:20pm on 14th Mar 2011, Lindsay_from_Hendon wrote:

    > if you see a twenty pound note on the ground, you shouldn't pick it
    > up as if it were real someone already would have done.

    So you would stoop for a mere twenty pounds, eh? Some millionaire you are...

    - I'd stoop for less, that's why I am a millionaire!

    71. At 13:56pm on 14th Mar 2011, United Dreamer wrote:
    #60 "It's like saying if you see a twenty pound note on the ground, you shouldn't pick it up as if it were real someone already would have done."

    Many would have given it back to the person who's pocket it fell out of.

    - You've added a new agent to the example. There's no one else around.

    Complain about this comment

    72. At 13:58pm on 14th Mar 2011, davidbrent wrote:

    I do apologise, I hadn't realised you were the one shining genius able to recognise that a major earthquake and tsunami in the world's 3rd largest economy was likely to cause share prices to fall. That must be one of the unique skills and talents we are always being told bankers have - the ability to spot the bleedin' obvious!!

    - I didn't say I was a genius, I actually said it was easy pickings. It is "bleedin' obvious" as you say so I piled in and made a mint. I might buy a Lexus to even things up (it's Japanese for Mercedes).

    Complain about this comment

    73. At 14:04pm on 14th Mar 2011, SSnotbanned wrote:

    - I have no idea what you're on about.

  • Comment number 80.

    53. At 12:53pm on 14th Mar 2011, Scott
    'Most Japanese debt is held by Japanese citizens so it's up to them really if they want to forego their life savings to bail out their own government's half century of overspending.'

    So, are you suggesting that the government should not have allowed them to save? Or were you thinking someone else might pay them the interest they want? !

  • Comment number 81.

    Ok, some numbers.

    The Japan seaquake was the countries largest ever recorded.

    So, on recorded levels, they are getting bigger, but((even though there have been thousands of quakes and tremours(some sample size says scientist ?)) with only about 100 years evidence, it's unlikely to the largest ever since Japan was conceived as a country countless millions of years ago.
    Check the height of those mountains !!

    The (other) thing is this.
    HARMFUL PLUTONIUM RADIATION is said to last for THOUSANDS OF YEARS.
    Again, Japan has only about 100 years of earthquake magnitude evidence.
    what any self-respecting scientist would say is that we need thousands of years of earthquake evidence at Japan to give a respectable magnitude standard for which the nuclear reactors should be built to.

    I could say YOU DO THE MATHS but many have already done so, and failed.

    DO THEM AGAIN or else....

    Or else what ??
    What next ??
    Well apart from the same thing happening again and again. The United Nation will impose a population embargo on yous lo-t.

    In future, individual countries will not be allowed populations that cannot be supported by own their renewable energy resources.
    Populations will thus be based on economic activity and energy needs/resources
    One Plan.

    ET.

    Try working out the cost of that.

  • Comment number 82.

    How will Japan finance it's reconstruction? is the title of RP's blog.

    Crickey - I know this is a business blog, some of these posts make disturbing reading?

  • Comment number 83.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 84.

    Really fed up yar.Really fed up. It is purely a natural disaster .Not at all man made like 9/11 or ww2 . Why the world is not realising ,the human species is in danger . Does this stop with this ? . NO. It will strike again somewhere soon . We cannot do much . This is the time for forgetting that I'm US or I'm UK or I'am chin or kiwi . Geographical borders melts away. Only humanity remains . Hardship and burden shuld be taken by everybody in the planet . Not only by them alone in that area.
    That is the only way we can assure ourselves and boldly face nature . The ocean is Roaring . The earth is waiting to quake again eagerly . Kindly nobody shuld forget it.
    For Humans there is no other God than Humans .

  • Comment number 85.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 86.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 87.

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  • Comment number 88.

    Two positive things about this disaster:

    Whatever plight the Japanese economy is in, the money will be found and the reconstruction will benefit the infrastructure and industry eventually.

    There are many people in the countries which fought the Japanese in WW11 who do not forgive them for their extreme cruelty. It is good to see these same people, among others, clustering round to offer help in times of Japan's need; a humanitarian gesture.

  • Comment number 89.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 90.

    79. At 14:22pm on 14th Mar 2011, Lindsay_from_Hendon wrote:

    The tension builds up, suspending for a few days isn't long enough to see if government measures are working. People panic, it's their bonuses or life savings on the line so they sell at any means.

    So keep the market shut for longer ??? a few weeks perhaps ?? i dont know it just seems far more sensible to me to stop speculation.

    Your link to the wiki will take for me to digest and read up on but i was taken by 1 line at first glance through.........

    "Following the stock market crash, a group of 33 eminent economists from various nations met in Washington, D.C. in December 1987, and collectively predicted that “the next few years could be the most troubled since the 1930s”.[7] In fact, calendar year 1987 had an overall gain, as did 1988 and 1989."

    So here again we see experts in the financial world getting it wrong.....


    My point still stands however about just what help having the markets open are actually giving to the people who need the immediate help on the ground, i must be just too thick to see the relationship.

  • Comment number 91.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 92.

    Japan's economic problems in recent years have not been helped by the excessive propensity of middle class Japanese to save. This is the mirror image of the large public debt. Many will need to dig into their savings to repair or replace property lost last week, and perhaps the government might become brave enough to risk increasing taxation to fund rebuilding and repairing damaged public property.

    Contrary to the view cultivated by right wing commentators, a bit of "tax and spend " is sometimes exactly the medicine that the economy needs.

  • Comment number 93.

    90. At 15:14pm on 14th Mar 2011, AqualungCumbria wrote:
    Your link to the wiki will take for me to digest and read up on

    - You've never heard of Black Monday? Anyway, it coincided with Michael Fish's not a hurricane (you must have heard of that?) which closed markets and hence made it worse.

    My point still stands however about just what help having the markets open are actually giving to the people who need the immediate help on the ground, i must be just too thick to see the relationship.

    - So you want traders to stop working and go out and start digging? Forget trained professionals, no get traders, analysts, accountants all out onto the streets with a spade. Maybe if people keep working then the Japanese economy may grow (or at least stay static, ok at least not contract so much) which means tax revenue increases and hence the government/companies can afford to repair the damage. Presumably you don't mind say teachers going to work (say in a mildly hit area but within a commutable distance) but they aren't giving to the people who need immediate help on the ground so why are traders any different? Let me guess, you're going to say something like trading isn't important whilst teaching is. Who gets to decide? Sounds awfully like communism to me.

  • Comment number 94.

    93. At 15:31pm on 14th Mar 2011, Lindsay_from_Hendon wrote:

    Let me guess, you're going to say something like trading isn't important whilst teaching is. Who gets to decide? Sounds awfully like communism to me.

    ===========================================================

    Aqualung might not say it but i will. Whats the point of having a bouyant stock market if there is no body to do the work and to fill the jobs left by those who have died. whats needed now is much more education for those who are left so that they can fill empty positions. Thats far more important than trading, and this is coming from someone who actually works for an investment management firm.

    donate your profits to charity and be grateful that you still have your comfortable life. dont become exactly the sort of capitalist that WOTW is always talking about, your hardly going to persuade anyone to keep the capitalist system we live in now are you.


  • Comment number 95.

    92. At 15:28pm on 14th Mar 2011, stanblogger

    Spend and tax would be more accurate. The government collects tax only in its own issued 'money' , how would it tax that out of the economy before it first puts it in?

  • Comment number 96.

    I had heard of black monday but was not equated with the full story worldwide.

    As for the traders can you explain how having them trading in japanese stocks at this time is helping their economy ?? i only see the stocks falling much of which will be based on speculation, and as traders dont actually create any wealth themselves just skim off the trading it surely must be harming not helping.

    As for traders doing other things to help, your point is well made , and yes , they would probably be of no use in the immediate area anyway and would hinder the experts i would never suggest they swapped armani suit for a windscale suit.

    You shouldnt try to guess what i think, as i have said i am thick in such matters and just trying to understand, i do however agree that the bulk of people who can , should try to get on in as normal as is possible way.

    One thing i am pretty sure of the Japanese people will do whatever is necessary to get their country back on its feet,once the immediate problems have been dealt with, but we are some way away from seeing that at this time.

  • Comment number 97.

    "49. At 12:44pm on 14th Mar 2011, jeffa4444 wrote:
    Robert: The biggest current issue is not the share prices, not the bond market, not Japan debt to GDP ratio but the fate of its people and the fate of the stricken nuclear power stations & the potential threat these pose not just for Japan but the region if they have a total melt down.
    Japan re-built itself after WWII and Im sure its people in time will do the same again as long as radiation polution does not seriously affect the area of devistation in the worst case senario. "
    = = = = = = = = = = =
    I think, thanks to the Americans, Japan has had a fair bit of experience rebuilding on top of some pretty bad radiation "pollution". They will rebuild in time - but that in no way reduces the sheer sorrow and incredulity of the presence crisis.

  • Comment number 98.

    94. At 15:56pm on 14th Mar 2011, avalanche-jersey wrote:
    Aqualung might not say it but i will. Whats the point of having a bouyant stock market if there is no body to do the work and to fill the jobs left by those who have died.

    - Population 127 million. Casualties 3 thousand. Unemployed 3 million. Assuming that everyone who died was employed, I think Japan will easily fill their roles unless (and this is a big IF) everyone who died were in highly skilled jobs like doctors or bankers.
    whats needed now is much more education for those who are left so that they can fill empty positions. Thats far more important than trading, and this is coming from someone who actually works for an investment management firm.

    - They'll be back to normal in a few weeks. The idea that Japan can educate people in such a short space of time is laughable. Learn to be a doctor in six weeks!

    donate your profits to charity and be grateful that you still have your comfortable life.

    - I earned it, it's mine! Why don't you give all of your income to charity? Besides which charity? I'm not grateful for my comfortable life, I earned it! Last big earthquake here was 1356, I think I'll be alright.

    dont become exactly the sort of capitalist that WOTW is always talking about, your hardly going to persuade anyone to keep the capitalist system we live in now are you.

    - I'm not trying to persuade anyone. I don't have to. I think you'll find this capitalist system is fully operational!

  • Comment number 99.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 100.

    C'mon Peston, it's easy to report on the obvious and chuck in a few numbers and quotes but what about us.

    What about UK, it's reported on BBC so often that we are now part of a larger "world market" and "world forces", hence what happens in Japan will affect us here in UK.

    For a start, with UK pensions in the spotlight this horrendous event in Japan is bound to affect some UK private pensions, especially with investments in some of the biggest car and electronic companys in the world.

    Japan may return to growth, but the fact & point is is what it is enevitably LOSING, that CANNOT be returned.


    There is also the factual reality that knock on domino effects will resultingly affect even UK government review plans for state pensions due to detrimental effects to UK economy, as well as other UK economic/financial situations and even austerity measures.

    Japans economy is not like Iceland or ireland, hence please give these events and it's growing consequences the RESPECT that they deserve.

    If Moodys & Poor etc do anything to damage Japan, then I personally think they should all be rounded up and imprisoned in Guantanamo Bay, because resultingly and consequentially as a direct consequence of their involvement in the fraudulent grading of USA Sub Primes and the devastating consequences to the world from banking collapse & economic/financial damage, I personally regard the credit rating agencies, Moodys & Standard & Poors etc as worse terrorists than Al Queda or the Taleban for the damage they have direct responsibility for and afflicted upon the world.

    Fact is, there are many variable events which were and are impossible to write into UK government austerity measures & economic plans & future state pensions plans etc, and WHEN such events happen, they have variable damaging consequences.

    For instance-

    Icelandic volcanic eruption
    Middle East
    UK snow
    Japanese earthquake & tsunami

    All these are important factors in UK prosperity and our ability to pay national debts etc, hence can we have some reporting which is less like paint by numbers and more atune to a masterpiece of reporting excellence.

 

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