It will take perhaps a few more weeks for initial analysis to be done regarding the effect of the earthquake and tsunami on Japan and the global economy.
I see the near-term effects as 1) nuclear contamination over a wide area, 2) care for the survivors and recovery of the dead, and 3) the financial disruption within the country.
Japan is vulnerable. This is a dangerous situation for the East Asian balance of economic and political. The outcome is hard to assess.
Longer-term remains a question mark. I know there is tremendous resilience in Japanese culture. However, the long years of economic stagnation and deflation in (20 in all) and the fragile global recovery lead me to believe there will be significant future challenges for Japan and its people.
There is almost certain to be a negative effect on the global economy as well, slowing growth in the United States.
This is an example that supports my concern:
"The physical havoc wreaked is staggering. As Scott Anderson, senior economist of Wells Fargo Securities, reports, Sendai, the biggest port in northeast Japan, was virtually wiped off the map. Sendai was a major exporter of rubber and marine products, office machinery, paper goods and auto parts. Half a dozen oil refineries in the area that represented a third of the nation's entire refining capacity are shut down and, with electric-power capacity severely curtailed, rolling blackouts are cutting into production."
Abelson, Alan, 2011. Nuclear nightmare. Barron's, Mar. 19.
To add, the area around Sendai has a significant amount of agriculture, raising fears of a contaminated food supply.
It total, the economic damage could total 15 trillion Yen, or about $180 billion according to Barron's and my own estimates. This places a huge financial burden on Japan.
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