Thursday, March 24, 2011

At $309bn, Japan quake costliest-ever disaster

TOKYO: The Japanese government on Wednesday said this month's tsunami which has killed over 9,000 people so far may have caused damages of up to $309 billion (nearly Rs 13.85 lakh crore), making it the largest ever natural catastrophe in terms of economic damage. 

So far the record was held by Hurricane Katrina, which is said to have caused damages of around $75 billion. The first official estimates from Japan mean that the tsunami's economic impact is nearly four times that of Katrina. 

At this scale, the damage caused by the tsunami is 10% higher than India's total spending in 2011-12 , which is budgeted at Rs 12.58 lakh crore. 

The damage is over 30 times of what was caused by the Asian tsunami that hit India and other countries in December 2004, killed nearly 2.3 lakh people in the Indian Ocean region and affected around 5 lakh in all. The economic damage from this was estimated to be in the region of $10 billion (Rs 45,000 crore at today's exchange rate). 

According to latest reports, the death toll in Japan is estimated at 9,400, while 14,700 persons have been reported missing and another 2,750 are injured . On Wednesday, the Japanese government said it estimated damage from the tsunami at anywhere between $197 billion (around Rs 8.8 lakh crore) and $308 billion. The estimate covers damage to infrastructure in seven prefectures affected by the disaster, including damages to nuclear power facilities north of Tokyo. Wider implications on the economy, including how radiation will affect food and water supply, are not included in the estimate. 

Economists had initially estimated losses of up to $184 billion (Rs 8.2 lakh crore). Encyclopedia Britannica had estimated that the damage caused by World War II was of the order of $1 trillion. 

The official Japanese government report didn't include specific forecasts for how the damage would affect GDP, which economists at Morgan Stanley MUFG Securities forecast may contract as much as an annualized 12% in the second quarter. GDP expanded at a 3.2% in the second quarter after the 1995 Kobe quake. 

The destruction will push down GDP by as much as 2.75 trillion yen (around $34 billion ) for the year starting April 1, Wednesday's report showed. The figure, about 0.5% of the 530 trillion yen ($6.5 trillion) economy, reflects a decline in production from supply disruptions and damage to corporate facilities without taking into account the effects of possible power outages. 

Japan may set up a reconstruction agency to oversee the rebuilding effort and the central bank has injected record cash to stabilize financial markets. 

Bank of Japan board member Ryuzo Miyao said on Wednesday that it may take more time to overcome the damage of the tsunami than it did after the 1995 quake in Kobe, western Japan. 

"The ability to depress economic activity from the supply side is larger than the Great Kobe earthquake and we must bear in mind that these effects could linger for some time," Miyao said in a speech. "The short-term effects are not insignificant."

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