Japan could need up to five years to recover from up to $235bn (£145bn) worth of damage from the Tohoku earthquake, according to the World Bank.
The disastrous earthquake and tsunami, which occurred on the 11 March in north east Japan, has disrupted supplies in some of the country's largest industrial sectors.
"Disruption to production networks, especially in automotive and electronics industries, could continue to pose problems," the World Bank says in its East Asia and Pacific Economic Update.
But the authors of the report predict growth should recover in the second half of this year, after dropping 0.5% so far in 2011.
The effects of the disaster could spread to East Asia, the World Bank warns.
"Clearly, given Japan's importance in East Asia, the tragic events unfolding will be felt in the region. But it is far too early to give an accurate assessment of the likely damages," says Vikram Nehru, chief economist for the East Asia and Pacific region.
"At this stage, we expect the economic impact of this disaster on the East Asian region to be fairly short-lived. In the immediate future the biggest impact will be in terms of trade and finance. We expect growth in Japan will pick up as reconstruction efforts accelerate."
A quarter of East Asia's long-term debt is yen-denominated, though this varies from country to country. In China roughly 8% of national debt is yen-denominated, while in Thailand, it is roughly 60%.
A 1% appreciation in the Japanese yen translates into about a $250m increase in annual debt servicing on the yen-denominated assets held by the nations, the report points out.
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