IHS Global Insight: Japan long-term economic impact limited

The impact of Japan’s earthquake and nuclear disasters is likely to have severe effects within the country in coming months, but won’t have a major macro-economic impact in the medium to longer term, according to researchers IHS Global Insight.

In a preliminary assessment, the researchers said the major uncertainty in this month’s malfunctions at several Japanese nuclear power stations lies in the prospect that 10 pc of the country’s electricity generation capacity will be offline for at least several months.

“In the near term, this could have major negative ramifications for the Japanese industrial sectors,” IHS said.

The market research institute said disruptions in Japanese industrial activity could have a “significant” impact on global supply chains. “This is especially important in industries such as autos, telecommunications and consumer electronics,” it said.

However, from an economic point of view, lower Japanese production could boost demand for similar products elsewhere in the world. And lower Japanese growth could temporarily lower world energy demand and energy prices, IHS said.

IHS estimated that the disaster in Japan would reduce the country’s real GDP growth by 0.2 to 0.5 percentage point this year, but the economy would likely recover that ground lost in 2012. The impact on the world economy would be negligible, IHS said.

For the US, the researchers issued a stark warning that developments in Japan could lead to a decline in consumer confidence that could have major implications for the economy there. “The Japanese earthquake, with extreme uncertainty over the extent of the nuclear disaster there, may add to a sense that global events are spinning out of control,” IHS said.

The researchers warned that, in Europe, the economic climate is “still pretty fragile,” and that this makes the continent more vulnerable to shocks than it would be in a stronger upturn.

IHS said reconstruction efforts in Japan will also contribute to higher commodities prices.


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