THE JAPANESE government yesterday estimated the direct damage from the deadly earthquake and tsunami at as much as €219 billion, making it the world’s costliest natural disaster.
The first official damage estimates will serve to map out disaster relief plans and emergency budgets to fund recovery costs.
Tokyo said the estimate covered damage to roads, homes, factories and other infrastructure, and eclipses the losses incurred by other natural disasters such as the 1995 Kobe quake and Hurricane Katrina in 2005.
The figure could go even higher, as the estimate does not include losses in economic activity from planned power outages or the broader impact of a crisis at a stricken nuclear power plant in Fukushima, which economists say pose the biggest risks to the economy.
“The impact from the planned power outages is likely to be significant,” Fumihira Nishizaki, director of macroeconomic analysis at the Cabinet Office told reporters.
The upper end of the 16-25 trillion yen (€139-€219 billion) estimate range would amount to about 6 per cent of Japan’s gross domestic product.
“This quake will cause the condition of Japan’s economy and output to be severe,” Bank of Japan Governor Masaaki Shirakawa said. Central bank board member Ryuzo Miyao repeated the bank’s pledge to take appropriate policy action if needed to support the world’s third-largest economy.
“We need to be mindful that the quake’s negative impact on the economy, at least on the supply side, may be bigger than the Kobe quake 16 years ago, and be prolonged.”
In its initial response to the disaster, the central bank doubled the funds earmarked for purchases of a range of assets and started pumping record amounts of cash into the money market to prevent it from seizing up.
It later followed up by joining forces with other G7 central banks in a rare co-ordinated move to keep a rallying yen from inflicting further damage to the economy.
With interest rates near zero and banks’ cash balances at records above levels seen in 2001-2006 when the BOJ sought to flood the banking system with cash to spur lending, there is not much more the central bank can do to help the economy.
“The ball is in the government’s court,” said Yasunari Ueno, chief market economist at Mizuho Securities in Tokyo. “Currency intervention was one thing. The next thing it needs to do is to come up with a credible fiscal spending plan.”
Officials from the ruling coalition have said that at least two and perhaps more emergency budgets would be needed to pay for the reconstruction, with the first focused on immediate disaster relief, possible in April or May. – (Reuters)
