TOKYO — Cars lie scattered at a port, a nearby oil plant spews clouds of smoke and shattered factories burn in northeastern Japan — signs of the dire hit the nation’s economy is taking from a devastating earthquake and tsunami that has killed thousands.
The 8.9-magnitude tremblor that struck Friday triggered a wall of muddy waves that swallowed whole towns. Nuclear power stations were disabled and two reactors at one plant are threatening meltdown. An official says at least 10,000 people are dead in one coastal state alone.
The destruction may be reflected in the Tokyo stock market on Monday, with some analysts predicting it will nosedive when trading starts. The Bank of Japan said it’s ready to take action to support the economy and ensure there’s enough cash in the financial system to keep it operating normally.
Japan’s economy, which lost its place as world’s No. 2 to China last year, was already in a fragile state. It has been ailing for 20 years, barely managing to eke out weak growth in-between slowdowns, saddled by a massive public debt, at 200 per cent of gross domestic product — and growing.
Koetsu Aizawa, economics professor at Saitama University, says tens of billions of dollars will be needed to rebuild homes, roads and other infrastructure — requiring public spending that will add to the national debt.
“In the short term, the market will almost surely suffer and stocks will plunge. People might see an already weakened Japan, overshadowed by a growing China, getting dealt the finishing blow from this quake,” he said.
Japan, however, has endured and recovered from other major disasters.
The 1995 earthquake in Kobe cost $132 billion and was the world’s most expensive natural disaster, according to Sheila Smith, senior fellow for Japan Studies at the Council on Foreign Relations, a New York-based think-tank .
Still, Smith believes damage to Japan’s economy from Friday’s quake and tsunami will be massive.
“The long-term economic blow to a country already struggling to lower its budget deficit ... will be significant,” she said.
The hard-hit northeast of Japan is a major centre for car production, complete with a myriad of parts suppliers and a network of roads and ports for efficient shipments.
The quake — the biggest in modern Japanese history — left all that in shambles.
“There is no way to get our products out, even if we make them, with the roads and distribution system damaged,” said Honda Motor Co. spokeswoman Natsuno Asanuma.
Toyota Motor Corp., the world’s top automaker, Nissan Motor Co. and Honda are suspending production at all their auto plants in Japan, starting Monday. When production will resume is uncertain.
Honda said the production halt will cost it about 4,000 vehicles a day.
Nissan said the tsunami damaged 1,300 vehicles bound for the U.S., including its Infiniti luxury brand, at Hitachi port in Ibaraki prefecture (state) in the northeast, and 1,000 vehicles stored at another centre.
Among the plants being shut down is one Toyota had just opened in Miyagi prefecture, within the region hardest hit by the quake.
The factory, Toyota’s first new Japan plant in 18 years, had been proudly shown to reporters and guests last month as a welcome development in an otherwise stagnant Japanese auto market. It was set to start producing the Corolla for both the Japanese and North American markets in April.
Profits at utilities Tokyo Electric Power Co. and Tohoku Power are likely to suffer because of recovery expenses for the nuclear power plants damaged by the quake, according to Shigeki Matsumoto, analyst at Nomura Securities Co.
The government said Sunday that the emergency use of sea water to cool reactors, which developed problems after the quake, will make them unusable.
Also likely to take a hit to its earnings is Cosmo Oil, whose refinery near Tokyo has been on fire since the quake.
Electronics plants in the northeast were also temporarily closed, including those owned by Sony Corp. and Toshiba Corp.
But Aizawa, the economics professor, warns against too much pessimism.
A giant disaster can get Japan to pull together and even provide opportunities for construction and housing businesses, he said.
“There can be a blessing even in misfortune,” he said. “Recovery is about regaining a livelihood for people. No one is going to blame Japan or lower its debt ratings for working on a recovery. This is about lives.”