The Japan Tragedy-Atasi Das

Japan was struck by a ferocious 33 feet tsunami, triggered by an earthquake of magnitude 9.0, on 11th March 2011-around 6,500 people have been confirmed to be dead from the natural disaster, and 10,300 have been reported to be missing. Some 390,000 people have been rendered homeless. This enormous calamity brought Japan to the brink of a nuclear disaster, when overheating problems were detected in atleast three of its nuclear power plants- the Fukushima Daiichi power plant, the Onagawa power plant and at another nuclear plant in Ibaraki district, raising fears of an uncontrolled radiation leak. An explosion has occurred in a reactor at the Fukushima Daiichi power plant, though the emission of radiation is reported to be under control.

After effects of the crisis
Even as Japan’s worst humanitarian crisis since World War II seems to be far from over, one initial estimate has put the financial loss to be around $ 184 billion, roughly 3 per cent of the country’s Gross Domestic Product (GDP). Japan’s current debt-to-GDP ratio is at over 200 per cent.

Stock markets worldwide have been affected by the crisis. However, the Bank of Japan has injected a total of $347 billion in the week following the tragedy to help the stock markets recover. The insurance claims, both in the life and non-life categories could become the highest in history. 

The yen - dollar rate is the highest since 1995 crossing 80, as Japanese firms repatriated funds to avert a crisis. The worst hit sectors in Japan include electronics, automobiles and steel. The Japanese economy is likely to slow down in the first half of 2011, but a reconstruction-driven recovery is likely in the second half. France has convened a meeting of the G7 nations, to respond to the crisis, mentioning a possible purchase of Japanese debt.

The Japanese nuclear sector meets around 20% of the nation’s domestic energy requirements and the demand for coal, Liquefied Natural Gas (LNG) and oil is likely to increase, as a result of the crisis.  The power situation has resulted in rolling blackouts and companies like Sony, Toyota, Nissan, Honda and Toshiba have decreased production to lessen power consumption.  International Energy Agency data shows that Japan imports around 80% of its oil requirements from the Middle East-the supply of oil from the Gulf to Japan has been stalled for the time being.  The northeastern Japanese ports have been damaged and around one third of the country's gross refining capacity of 4.5 million barrels a day is non functional.

 Japan’s automobile industry may face a serious supply chain bottleneck at a time when some of its biggest brands, like Honda, Toyota, Nissan and Suzuki, are planning aggressive strategies for India’s top growth automobile market.

From an Indian perspective, the cost of Yen loans may increase and the insurance premium for companies like ONGC may rise. The temporary slowdown of Japanese aid may cause Japanese-funded infrastructure projects in India to be affected in the short term.

On the global front, nuclear energy programs and nuclear power plants worldwide, including those in India, have come under government scanner, as regards their security and susceptibility to natural disasters.
Prime Minister Manmohan Singh assured the Parliament that the Indian nuclear facilities were safe, but said he was nonetheless ordering a safety check of these installations. The Atomic Energy Regulatory Board, India’s top nuclear safety watchdog, has decided to initiate an exercise to check if the country’s atomic plants can withstand a similar severe natural calamity. Any decision to go slow on nuclear energy programs will have its economic, financial and social repercussions, given the fact that, the world is increasingly trying to opt for cleaner energy options, in view of the adverse global climatic change.

As Japan tries to rebuild its economy, its outside investment is likely to decrease, completion of Indian joint ventures may get delayed and the profit margins of the companies, which pay royalty to the Japanese firms, will be affected (on the back of a strengthening yen). IT companies with offices in Japan will experience declining revenues.

Indian exports to Japan comprise only around 2.1% of its total exports but India received over USD 22 billion in foreign direct investment from Japan, in the last decade. Japanese companies like Suzuki, Daiichi Sankyo, JFE, Sumitomo Mitsui, NTT DoCoMo and Nippon Life, have a substantial presence in the Indian market and Japan is also India’s key partner in infrastructure projects like the Mumbai-Delhi corridor. So it is clear that the stakes are quite high for India.

Conclusion
The human cost of the tragedy fuelled by the earthquake and tsunami in Japan is immeasurable, and the nuclear disaster following the natural calamity, has added to the trail of destruction, with serious long term consequences for the health of the people, not only in Japan but worldwide. The financial cost of the crisis is astronomical-countries worldwide have already offered logistical and monetary aid to the Japan to help it tide over the crisis.