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The Consequences of Tragic Events in Japan on World Economy
The tragic events in Japan are the latest where mother nature is putting us on notice.
Whilst the people of Japan have the impact of massive loss of lives and property it is unlikely that this event will derail the world economy. Notwithstanding the fact that Japan accounted for US$5.4 trillion, or 8.7 percent, of world GDP in 2010, according to numbers provided by the IMF. Being the world’s 3rd largest economy any impact on Japan’s economy will feed through to the world economy. However, most believe that it will have small consequences including an increase in government spending to rebuild the country’s infrastructure. In fact a small dip in Japan’s economy may be a positive as far as the global economy is concerned as it would reduce the strain on inflation as a result of rising oil and material prices.
Sectors that will be directly impacted will be in the area of insurance companies given the huge scale of costs which may be up to US$100 Billion. Reinsurance companies will be looking to pick up an estimated US$15 Billion of this with the rest to come from increased government spending by Japan. Naturally, building companies and other companies that will benefit as having to “rebuild” the country will have a positive impact to their respective businesses.
With the explosion at Tokyo Electric Power Co.’s Fukushima Daiichi No. 1 reactor after its cooling system failed there may be fallout for the Nuclear industry which has been staging a renaissance of late. Currently there are 442 reactors worldwide that supply about 15 percent of the globe’s electricity, according to the London- based World Nuclear Association. There are plans to build about 150 additional reactors, most of them in Asia, and 65 reactors are currently under construction. In the wake of the 1979 partial meltdown at the Three Mile Island reactor in Pennsylvania there was a massive psychological impact upon people which halted the progress of nuclear power.
Whilst the people of Japan have the impact of massive loss of lives and property it is unlikely that this event will derail the world economy. Notwithstanding the fact that Japan accounted for US$5.4 trillion, or 8.7 percent, of world GDP in 2010, according to numbers provided by the IMF. Being the world’s 3rd largest economy any impact on Japan’s economy will feed through to the world economy. However, most believe that it will have small consequences including an increase in government spending to rebuild the country’s infrastructure. In fact a small dip in Japan’s economy may be a positive as far as the global economy is concerned as it would reduce the strain on inflation as a result of rising oil and material prices.
Sectors that will be directly impacted will be in the area of insurance companies given the huge scale of costs which may be up to US$100 Billion. Reinsurance companies will be looking to pick up an estimated US$15 Billion of this with the rest to come from increased government spending by Japan. Naturally, building companies and other companies that will benefit as having to “rebuild” the country will have a positive impact to their respective businesses.
With the explosion at Tokyo Electric Power Co.’s Fukushima Daiichi No. 1 reactor after its cooling system failed there may be fallout for the Nuclear industry which has been staging a renaissance of late. Currently there are 442 reactors worldwide that supply about 15 percent of the globe’s electricity, according to the London- based World Nuclear Association. There are plans to build about 150 additional reactors, most of them in Asia, and 65 reactors are currently under construction. In the wake of the 1979 partial meltdown at the Three Mile Island reactor in Pennsylvania there was a massive psychological impact upon people which halted the progress of nuclear power.
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