The Tohoku Pacific earthquake: Economic consequences

The four prefectures most affected by the earthquake (Iwate, Miyagi, Fukushima and Ibaraki) account for 6 to 7% of Japan’s population and economic output. The destruction caused by the earthquake and the subsequent tsunami is so large that it is not possible at this point to estimate its economic impact. Such disasters reduce potential growth through damage to tangible fixed assets and injury and loss of life. The 1995 Kobe earthquake, for example, resulted in damage estimated at around 2% of GDP. The area hit by the Kobe earthquake, as a share of GDP, was roughly comparable to the area devastated by the Tohoku Pacific earthquake. Nevertheless, the impact of the 11 March disaster may be much worse, given the greater severity of the earthquake and the subsequent tsunami. Moreover, a series of aftershocks continues to shake Japan. Read more...