Macroeconomists who have studied big disasters around the world over the past decade have found that major economies are generally strong enough to perform a repair job. And in this case, the disaster spread across hundreds of miles, but it didn’t strike an economic center; the battered Tohoku region accounted for just 2.5 percent of Japan’s economic output.
But the world’s third-largest economy must now perform two repair jobs at once, reconstructing a coastline while also grappling with a shriveling population, a growing social-welfare burden and a massive sovereign debt. This latest disaster elongated the list of problems for an economy that already had too many.
“The economy’s long-term trend, fundamentally, doesn’t change,” said Kazumasa Oguro, a macroeconomist at Tokyo’s Hitotsubashi University.
But then Oguro added, “the basic trend before this was deterioration.”
Researchers who study disasters describe a two-step economic impact, with a short-term blow that is followed by a quick, neutralizing wave of private investment, new jobs and government spending.
That’s the pattern Japan saw when a 6.9-magnitude earthquake struck Kobe in January 1995. The industrial port city lost 6,400 people. Some 100,000 buildings collapsed. The country’s economy grew 1.9 percent that year, and in less than 1 1
2 years, Kobe’s industrial production had nearly returned to normal.
In the two months since the March double-disaster and nuclear emergency, Japan has endured only the first economic aftereffect, crystallized last week when the government announced that, between January and March, its economy contracted at a 3.7 percent annualized rate. That second consecutive quarter of shrinkage tipped Japan into a recession.
The news doubled as a shorthand for all that had happened since the earthquake. Some 200,000 jobs were lost as a result of evacuation and building destruction, according to one research firm. Toyota suspended all domestic production until April 17 and is now operating at just 50 percent of usual levels. Concerned about Japan’s disaster-vulnerable supply chain, some companies, such as Nippon Steel, drew up plans to expand operations overseas.
The country also faces long-term energy shortages resulting from the damaged Fukushima Daiichi plant and other shuttered nuclear plants. Forced blackouts appear unlikely, but businesses are being asked to conserve energy. To avoid peak electricity times, some automakers plan this summer to close their factories on Thursdays and Fridays — and keep them open on Saturdays and Sundays.
As reconstruction money flows into the disaster region, though, economists expect Japan to experience a period of growth, beginning in the third quarter. Japan’s economy minister, Kaoru Yosano, called the recession a “temporary phenomenon” and predicted that the economy will still expand 1 percent this year.