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Friday, March 11, 2011

What The Kobe Earthquake Did To The Japanese Economy

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			Friday, March 11, 2011

What The Kobe Earthquake Did To The Japanese Economy

Today's earthquake and subsequent tsunami in Japan pose a real threat to economic growth in Japan in the short-term, but should be resolved quite quickly if history proves correct, according to Societe Generale analyst Takuji Okubo.

From Societe Generale:

For example, in the earthquake that affected the western part of Japan in January 1995 (known as the Kobe earthquake), over 6000 lives were lost, and the earthquake is estimated to have destroyed JPY 10 trillion (2% to GDP) worth of value...

In 1995, Japan's industrial production fell by 2.6% in January 1995, equivalent to less than a day's worth of production. Industrial production rebounded quickly in the following months. After falling by 2.6% in January 1995, industrial production grew by 2.2% in February followed by another 1.0% in March (see chart above).

Now this disaster is far from over, and it's impossible to know exactly what the negative impact on Japan's economy will be, but what seems certain is that it will be short lived.

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