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Why Japan Will Bounce Back

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Why Japan Will Bounce Back

Rebuilding Japan

Why Japan Will Bounce Back

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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The earthquake in Japan has had some far-reaching economic effects. China is scanning food from Japan for radiation. In Buffalo, New York, auto workers were temporarily laid off because of a shortage of parts that should have been made in Japan. But if history is any guide, advanced economies like Japan's tend to bounce back pretty quickly. Here's NPR's David Kestenbaum with our Planet Money team.

DAVID KESTENBAUM: Flip through the business press and you'll read about all kinds of disruptions. Twenty-five percent of Japan's ethylene production knocked off line. Ethylene is a major ingredient in plastic. And there are worries about two of Japan's major industries - electronics and auto manufacturing, both of which had some factories in the earthquake region.

Mr. SHINICHI SATO (Hino Motors): My name is Shinichi S-H-I-N...

KESTENBAUM: Shinichi Sato works for Hino Motors, which makes trucks and buses in Japan. Hino Motors also puts together axles for some Toyota vehicles. And their operations were shut down all last week and the beginning of this week.

Mr. SATO: This is not only Hino, but all the automobile company, I think same situation right now.

KESTENBAUM: There have been power outages. And now worries they might run out of parts, some of which were made in the earthquake area.

Mr. SATO: For example, some tires, oil seal or bearing.

KESTENBAUM: Bearings? Uh-huh.

Mr. SATO: Filter.

KESTENBAUM: Yeah. All the little things that you never think about inside your car or truck.

How many parts go into a truck?

Mr. SATO: So many. In the case of a truck, thousands of parts.

KESTENBAUM: So how will Japan recover? There is some history to look at. Japan, painfully, has been through this before. In 1995, an earthquake hit Kobe, Japan. In addition to the human toll, Kobe was a major industrial area.

Dr. ARTHUR ALEXANDER (Georgetown University): Kobe is something like the third largest port in the country.

KESTENBAUM: Arthur Alexander is an economist at Georgetown University.

Dr. ALEXANDER: It was a great international port. They had 35 containerized berths. They were all knocked out of commission. And the highways that we saw, there were the toppled freeway overspans that just came down. The railroads were twisted messes.

Now it turns out further inland there were other networks, transportation networks, that survived. And so a lot of the traffic was simply shifted over to those other arteries.

KESTENBAUM: If you look at a graph of Japan's GDP for those years the country's economic output you can't even tell the Kobe earthquake happened. The economy just kind of rewired itself.

Dr. ALEXANDER: One of great things about modern economies is they have tremendous redundancy, resilience, robustness in the face of damage. And you couldn't plan it better, but it happened kind of automatically.

KESTENBAUM: Now, the Japanese economy has been stagnant for about two decades. And the Japanese government has substantial debt - partly from years of government spending to try to stimulate the economy. And rebuilding will mean budget cuts or higher taxes or more debt.

But the Japanese economy with all its problems - it's gigantic. Five trillion dollars a year. So when it comes to at least the physical damage from the earthquake, Japan should be able to rebuild without a problem.

David Kestenbaum, NPR´┐ŻNews.

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