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Wednesday, March 16, 2011

The Earthquake In Japan Brings A Tsunami Of Troubles

On March 11, 2011, Japan was torn in, what may be termed as one of the worst earthquakes of all times. The following 10-meter high tsunami flattened the entire Pacific cost of the country, sweeping away ships, vehicles, people, and homes alike. Though the early warning systems did prevent some loss of life, the death toll has already crossed 10,000, thousands are still missing, and millions have lost their homes. The earthquake, measuring 8.9 on the Richter scale, has shifted the landmass by almost 8 feet and is believed to have affected the earth’s axis. Read about the likely financial impact here.

The Japanese Government is struggling at so many fronts at the same time that it has not been able to assess the actual level of damage. The estimate, on the basis of the information received so far, is being pegged at a staggering $60 billion. The rebuilding efforts after this tragedy are expected to be the largest ever attempted in the world. The tsunami in Japan has been particularly responsible for cutting all the communication lines and power supplies in the affected areas. This, in turn, has triggered an even more serious issue of suspected nuclear radiations from the Fukushima Daiichii atomic plant. Apart from the irreversible damage to reactors No. 1 and 3, fresh fire at reactor No. 4 and an alarming rise in temperature at reactors 5 and 6 have created serious concerns over a likely meltdown of the fuel rods and release of mass level radiations in the atmosphere! Japan has total 54 nuclear installations that make up for 30% of its total power supplies. Eleven out of these, including the Fukushima reactor, fall in the affected north-eastern region and have been shut down. Restoring these power sources is not likely to occur for some more time and this implies addition cost of switching to oil-based power generation. The Japanese authorities are drawing flak from the world community, on account of mismanagement and suppression of information. The nuclear disaster in Japan is being rated 5, next only to the Chernobyl disaster of 1986, and currently, it is impossible to gauge the expense on this account.

Japan is already suffering from a number of economic issues and the latest events have made a serious blow to its economic revival process. All of the affected areas have been rendered totally non-functional, where trading of daily necessities is also suffering due to lack of supplies. Though the industrial zones in Japan have not been directly hit by the earthquake and tsunami, production has come to a halt in many parts. The shipping industry is among the worst hit by the tsunami and there have been huge opportunity costs of lost production. Foreign workers have been evacuated, while auto majors, such as Honda, Toyota, and Nissan have suspended operations. There have been over 110 aftershocks to the Friday’s earthquake so far, with the latest, 6.0 on Richter scale, to hit Tokyo on Wednesday. It remains to be seen whether the current natural turmoil subsides or a fresh round of events throw Japan further out of gear.

Eurion Constellation is a research and consulting firm serving businesses in U.S., Europe and India. The research services have a global reach with focus on industry / market / economic research, financial analysis, equity research, company valuations and report writing. The consulting wing in India focuses on the startup and SME sectors. Please feel free to get in touch for any business requirements. Visit http://www.eurionconstellation.com

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