The Earthquake and Tsunami that hit Japan on March 11 this year was almost unprecedented in its size and devastation. At magnitude 9 it was the equal fourth largest in recorded history and the Tsunami that followed literally swept away whole towns, with the world then watching both the humanitarian and nuclear crisis with a sense of sadness and concern. After the quake it didn't take long for the finance industry to begin wondering how this might affect the country and Daniel Minihan wrote a post a few days after the event noting that there were people in both camps on how the economy would cope.
Since then the events at the Nuclear plants became worse, which triggered financial markets to tumble. The crisis then eased somewhat, which saw markets bounce right back (with the exception of the Nikkei). With all of this as a backdrop this month's article is a considered piece by Marcus Noland at the Peterson Institute for International Economics asking whether this will create a New Japan?
Parallels have been drawn with the 1995 Kobe quake and Marcus notes that whilst the damage from Kobe was estimated at $100 billion (estimates of the current quake are as high as $300 billion), Kobe was rebuilt and in 18 months had recouped 98% of its pre quake economic activity. Marcus discusses the Earthquake as being the catalyst for Japan making a decision on which direction they head, noting that with both an ageing and declining population it may be time for them to consider immigration rather than shunning it. If handled correctly the rebuilding could be done so as to enhance the economy rather than being spent on White Elephant projects of the past, but if not it may simply perpetuate the comfortable decline of the past 20 years.
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