Joanna Faith looks at how Japan's economy has fared one year on from the devastating earthquake and tsunami.
Last year’s earthquake could, arguably, not have come at a worse time for Japan. Even before the 9.0 magnitude quake, tsunami and nuclear crisis hit, killing over 18,000 people and disrupting industries from automakers to food producers, the country had suffered more than two decades of sub-par growth.
Deflation, an ageing population and a moribund stock market had paralysed the economy for more than 20 years, and at the time of the triple disaster last March, Japan was battling a budget deficit of close to 10% of GDP and a stubbornly strong currency.
In the immediate aftermath of the catastrophe, Japan’s markets reacted sharply; on the first day of trading after the quake the Nikkei index ended down 6.18% at 9,620 points. Insurance companies and manufacturing businesses, with plants near the earthquake’s epicentre, were hit particularly hard and sold off.
Joanna Faith assesses how Japan’s economy has fared 12 months on from the earthquake
Billionaire investor, Warren Buffett, emerged as one of the biggest losers with estimated paper losses of $150m from his investments in reinsurers Swiss Re and Munich Re.
In an attempt to revive the market, the Bank of Japan announced it would inject $183bn into the country’s banking system, the largest single amount ever by the country’s central bank.
Managers spent the days and weeks following the earthquake urging investors not to panic sell as a knee-jerk reaction, with some saying the disaster would bring good long-term opportunities for growth to Japanese companies.
Indeed, Buffett visited the country in November and promised to invest a billion dollars or more in “companies that have some kind of sustainable competitive advantage”.
Twelve months on, the country has made a commendable recovery. Growth, although slow, has resumed over recent months; wages are beginning to recover and consumer sentiment is improving.
The resilience of Japanese companies has become a focal point. Not only did businesses have to deal with the destruction of manufacturing plants and interruption to supply-chains, they also had to manage rolling power blackouts, implemented because of severe electricity shortages.
In the weeks after the earthquake companies issued conservative growth forecasts on the back of concerns about when they would regain domestic production levels.
Toyota was one example; the car giant said it would take until the end of December before it returned to pre-disaster domestic output. However, this date was quickly brought forward and production returned to near-normal by the end of June.
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