We’ve brought you an update of the situation at Japan’s strickent Fukushima nuclear power plant. So here’s a bit more from JPMorgan economist Masamichi Adachi
In terms of the macroeconomic impact in the aftermath of the earthquake and tsunami, and amid ongoing efforts to contain radioactive leakages at the Fukushima nuclear plant, Adachi says the immediate concern is the supply chain disruption.
He notes:
Many auto assemblers are having trouble restarting their production due to a lack of parts. According to our equity analyst, almost all major assembly lines have been at rest for the last ten days and this situation likely will continue for while. There is some anecdotal evidence that auto parts production is increasing outside the affected area, which will mitigate the shortfall of supply to overseas’ production.
However, more broadly speaking, damage to factories in the affected areas, rolling power outages even in the broad Tokyo region and other logistical problems are the three main hurdles to the recovery of production. We currently expect a 5.0%m/m, sa drop of IP in March and a flat print in April (-5%q/q, saar in 2Q), but a larger decline in March cannot be ruled out (although in that case April or May would likely be stronger).
Another concern is on the demand side, he adds:
According to media reports, cancellation of leisure activites (golf, travel, Japanese style pubs) was broad based, and the number of customers to department stores in Tokyo dropped sharply during the long weekend (albeit partly due to rain). While purchases of food and disaster kits have soared lately, the deteriorating sentiment (partly due to the rolling blackouts) is expected to weigh on overall consumption. We currently expect a 3% annualized contraction of the GDP-based consumption in 2Q.
According to Bloomberg, the latest median forecast of nine major houses looks for 0.4% real GDP growth in 2Q, followed by a gain of 1.9% and 3.5% in 3Q and 4Q, while our call is a 1.0% contraction in 2Q, and a 2.0% and 4.0% rebound in following quarters. Note, one firm expects a 10.0% plunge in 2Q followed by 6% and 10% rebound in 3Q and 4Q.
Related links:
Japan quake: in-depth – FT
Japan’s supply chain loss, Europe’s gain? – FT Alphaville
Global industries consider options on supply chains - FT
Just-in-time is not past its sell-by date – FT