Japan’s reconstruction effort since the March 2011 triple disasters has been bearing fruit, according to a group of panellists at the Asian Financial Forum in Hong Kong yesterday, but unsurprisingly the country continues to face hurdles.
The March 11 earthquake, tsunami and ensuing nuclear emergency represented the worst crisis that Japan has faced since the end of World War II. More than 15,800 people have died from the earthquake and tsunami, and the reconstruction costs put added pressure on Japan’s already strained finances, leading the country to compile three supplementary budgets for a total of about ¥18 trillion ($234 billion).
Besides the radiation worries and other problems arising from the disasters, the strong yen is now also posing a serious challenge for Japan’s exporters — though some companies have taken advantage of the situation by making foreign acquisitions.
“It takes companies years to overcome the negative impact of the strong yen, and Japanese companies will experience a huge amount of impact during those years,” said Akimitsu Ashida, the chairman of Mitsui OSK Lines, one of the world’s biggest shipping companies, speaking to FinanceAsia on the sidelines of the conference.
“Companies will certainly take counter-measures. But at the same time, those measures could actually lead to situations such as a loss of employment in Japan.”
Ashida noted that Japan likely holds overseas assets worth about ¥540 trillion, but about ¥100 trillion of that may be wiped off by the strong yen. “It will take a large amount of effort and time to get that back,” he said.
Last October, the yen rose to a record high against the greenback at around 75. Despite the government’s yen-selling intervention that followed, the yen remains strong, still trading at around 76. The strong home currency eats into exporters’ overseas profits and reduces their competitiveness abroad.
Although the chairman of the Tokyo-based shipping company acknowledged that companies could benefit from the strong yen — a gradual appreciation is acceptable — he said that when it appreciates in such a fast and drastic manner, it poses a problem.
Even so, 10 months since the earthquake, Japan’s economy as a whole is showing signs of recovery, even as the debt crisis in Europe keeps financial markets and investors on their toes.
Japan’s industrial production fell 2.6% in November 2011 from the previous month, but is expected to increase 4.8% in December and 3.4% in January, according to data from the Ministry of Economy, Trade and Industry published late last year.
At the conference, which coincided with the anniversary of the 1995 Kobe earthquake, Kazuko Koori, parliamentary secretary of the Cabinet Office and parliamentary secretary for reconstruction in response to the Great East Japan Earthquake, said the reconstruction effort required for the March 11 earthquake and the one from 17 years ago differs in nature.
In 1995, most of the damage resulted from the earthquake itself and the fires that followed, and the reconstruction focused on building a new generation of earthquake-resilient buildings.
“In contrast, the tsunami caused tremendous destruction after the March earthquake — whole towns were swept away,” Koori told the conference. “We need to create towns that are resilient from tsunami damage from both hard and soft perspectives.”
She also noted that the area of northern Japan that was hit by the disasters was home to factories for high-technology products, which are the pillar of Japanese industry.
“In addition to the revival of existing businesses, we need to devise ways to bring in new businesses, such as renewable energy and smart-grid technology.”