Japan’s ordeal — and its future

Tragic as it is, this natural disaster might serve as a catalyst for Japan to forge a brighter future.
Paul Sheard, Nomura
Paul Sheard, Nomura

Prime Minister Naoto Kan this week described Japan’s earthquake and tsunami as presenting the country with its biggest crisis and challenge since World War II. For a country that rose from the nuclear ashes of horrendous defeat to become and remain for four decades the second-largest economy in the world, this is no small claim. It may be true or at least close to the truth.

In economic terms, natural disasters such as this one represent in the broad a combination of an immediate negative shock supply, as human life, infrastructure and wealth are lost and economic activity is disrupted, and a positive shock to demand, which starts to...

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