1.japan earth... final

8/6/2019 1.Japan Earth... Final

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Japan earth quack impact on world economy

History ofJapan Earth Quack:-

Japan was hit by an earthquake of magnitude 8.9 on March 11. Thismassive earthquake led to major human tragedy in Japan killing morethan 30000 people, leaving many injured, and many other still missing.

The earthquake and the tsunami also struck nuclear installations inFakushima Dai-chi power plant. Because of disruption in the powersupply, the coolant cannot be supplied to the nuclear reactors in therequired amount, which raises the risk of radiation leak. Already tracesof radiations have been detected in some of the food items and thewater in Tokyo, which is located 220 KM south of the Fakushima.

Impact on Japanese Economy - Since Japan meets about 30% of itsenergy from nuclear based power plant, power supply to most of theparts in the country has been affected leading to closure of manyfactories. There has also been widespread damage to the infrastructurebecause of which there has been supply disruptions of many of thecritical raw material components. Most of the automakers includingToyota, Honda, and Nissan have closed their plants for the lack of rawmaterials, and the reduced power supply. Manufacturers ofsemiconductors, LCD displays, batteries etc have also shut down their

plants for at least next 2-3 weeks. Some of the major ports of Japanhave been affected by the crisis impacting both the exports and importsbased industries in the country. According to one estimate, cost ofreconstruction is expected to cross $300 Billion. Japan will find it difficultto fund this construction because of its high debt which is already 200%of its GDP. Also the country has witnessed lacklustre growth over last


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two decades, and this earthquake triggered crisis might further pushJapanese economy in downward spiral.

Impact on Worlds economy

Japan is the third largest economy in the World, after US and China. It isalso the second largest buyer of US funds. Since Japan will need moneyto fund its reconstruction, it might cash in the US bonds. This will forceUS fed to buy these bonds, and which will induce liquidity crunch in theUS market. Similarly Japanese investment firms have made lots ofinvestment across worlds capital markets. The pull out of the Japanesefund might lead to fall in stock prices in these markets in short term. Theother major impact of Japans earthquake will be on the crude oil. Since

most of the nuclear power plants of Japan have went offline, Japan willdepend more and more on crude oil to meet its energy needs. Japanhas number of oil fired power plants, and to meet its energy needs, itmight buy more oil from the world market. The crude oil prices, whichwere already on upward trend, will see a further spike as a result of this.The rise in crude oil prices will impact the worlds economy in short term.Japan is the major producer of many of the items including autocomponents, semiconductors, LCD displays etc. Disruptions to theproduction of these major items will lead to the supply chain disruptionsof these items in the world market. This will delay the production of high

end gadgets like smart phones, iPods, LCD TV, laptops etc. and cars.This will make a dent in the manufacturers profit.


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Impact on India economy

Indian stock market dropped by 0.8% on the news of Japaneseearthquake. But the market recovered next day. Killer earthquake whichhit Japan is expected to have a marginal impact on the Indian economy.Most direct impact will be the pull out of Japans investments in theIndian capital market. Japanese investment firms will draw money fromthe Indian market to fund the Japanese reconstruction. This will have anegative impact on the stock market in short term. Japanese have alsomade investment in number of important infrastructure projects in thecountry such as Delhi Metro, Delhi Mumbai corridor etc. These projectsmight see delay because of lack of availability of funds. Surge in thecrude oil prices because of increased demand of oil in Japan will alsoimpact the Indian economy which is already reeling under inflation. Automobile companies will be negatively affected by the crisis, sincethey depend on Japan for the supply of many of their critical auto

components. Also because of increase in the value of Yen (as a result oflack of yen supply), there will be an increase in the cost of these autocomponents. Japans refinery capacities have also been affected b +ythe quake. This will have positive effect on Indian petrochemical firmssuch as Reliance. Indian IT industry will be marginally impacted by thecrisis, since most of the IT firms derive only 1-2% of their revenue fromJapanese market. Only IT firm which has high exposure to J0apanmarket is Nucleus Software Exports which derives 30% of its revenuefrom the country. Crisis will have a minor impact on Indian exports, sinceJapan accounts for less than 3% of total Indian exports. Thus the recent

earthquakes which hit Japan will have marginal impact on Indianeconomy

1.japan earth... final

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