World Economies Feel the Aftershock of Japanese Disaster

In the wake of Japan’s recent earthquake, tsunami and nuclear worries the world economy braces itself for further shocks at an already difficult time. The series of disasters have had a profound effect, throwing the country’s domestic economy into crisis.

Japan has struggled during the last decade or so to emulate the prosperity which it enjoyed in the post-war period and problems have only gotten worse since the financial crisis, which resulted in a major fall in export revenues from the USA and Europe. 

These latest catastrophes have required extraordinary measures though, following a 10% drop in the Nikkei over last week, the largest since 1987. The Bank of Japan has announced billions of dollars of stimulus spending to keep the economy afloat, whilst the G7 leaders have agreed to intervene in an effort to stabilise the Yen.  Speaking last week Japan’s Economics Minister Kaoru Yosano said: "There is no doubt that the government and the BOJ need to make efforts to ease anxiety among the public and investors."

Internationally the impact of the disaster could be very significant. The initial effects were felt on the stock markets, where Germany’s DAX saw a sharp fall of 3.19% whilst Britain’s FTSE 100 saw a 1.38% contraction.

In broader terms the Japanese crisis has significant implications for the world economy as a whole. Fragile economies like that of the UK are likely to suffer from the economic uncertainty which the crisis has created. Furthermore, concerns have been raised about the energy markets, particularly as this coincides with the recent instability in the Middle East. Some fear nuclear programmes across the world will be stalled or even scrapped in light of the problems experienced at Fukishima nuclear plant.