Economic Crisis Next Emergency For Japan While Japan remains focused on its damaged nuclear reactor and other urgent needs, the nation soon will have to address the damage to its economy. Host Liane Hansen talks to Kenneth Cukier, business and finance correspondent in Tokyo for The Economist magazine, about the potential economic impact of the earthquake/tsunami on Japan.
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Economic Crisis Next Emergency For Japan

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Economic Crisis Next Emergency For Japan

Economic Crisis Next Emergency For Japan

Economic Crisis Next Emergency For Japan

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While Japan remains focused on its damaged nuclear reactor and other urgent needs, the nation soon will have to address the damage to its economy. Host Liane Hansen talks to Kenneth Cukier, business and finance correspondent in Tokyo for The Economist magazine, about the potential economic impact of the earthquake/tsunami on Japan.

LIANE HANSEN, host:

While Japan remains focused on its damaged nuclear reactors and other urgent needs, the nation soon will have to address the damage to its economy.

To discuss the economic challenges Japan will face, Kenneth Cukier, business and finance correspondent in Tokyo for The Economist magazine joins us. Welcome to the program.

Mr. KENNETH CUKIER (Correspondent, The Economist Magazine): Hi, thank you.

HANSEN: We know it could be a long time before Japan gets a full accounting of the damage, but what are the early estimates on the cost of this quake?

Mr. CUKIER: The early estimates are kind of all over the map. We've seen things between $25 and $50 billion. It's now up to about a hundred billion. Thats presuming that there is quake damage and that there's tsunami damage. What will the estimate be if there's severe radiation damage? We dont know. I think it could be far, far higher.

HANSEN: This was an event of historic proportions; business, commerce, transportation, power grids, infrastructure. They all were hit. Can you give us an assessment of whats functioning and what isnt?

Mr. CUKIER: Well, the first thing to know is that the northeast of Japan is not the industrial heartland of the country. There are obviously car factories. Nissan has factory there, Toyota has two suppliers up there, Honda and others. Those factories are closed that are in the area, obviously.

But what lot of people may not understand is that the supply chains, particularly in Japan, are very, very tight. And so if a factory somewhere doesnt produce a widget, it has huge knock-on effects throughout the country and other factories that might be depending on that part. So we do know that most of the automakers are saying that they're not going to open up production tomorrow. Or they're going to do it at maybe, say, four out of five factories will be closed.

I think one of the reasons for that, as well, is that they realize that there may not be the power, enough energy and electricity to power up their factories. So that they're realizing that this makes the sense the nation and for their workers to just catch its breath.

HANSEN: Are you seeing shortages in basic necessities food, water, medicine, shelter?

Mr. CUKIER: In the crisis area, yeah, obviously. And relief efforts are there to supply the basic necessities to people. Elsewhere in the country there's minor shortages in the sense that deliveries might be impacted. It's also precautionary stockpiling. If there is another - these other aftershocks become another big earthquake that creates a problem you want to be stocked up.

HANSEN: Is it possible to access what this is going to do to the long-term economic prospects for Japan?

Mr. CUKIER: Right now, if the nuclear catastrophe is averted, then you could imagine it's going to be probably a year of rebuilding. GDP will suffer initially because production will be lower. Then you'll actually see lot of the public spending kick in, so you actually may see or artificially, of course, the economy moving along because of all this government spending on infrastructure and rebuilding.

Longer term, the Japanese economy was sickly and ailing prior to the earthquake. It still will have all the same problems when this incident is remedied that it had before, unless those other problems, those larger systemic problems, get addressed.

HANSEN: Kenneth Cukier is business and finance correspondent for The Economist magazine. He joined us from his base in Tokyo. Thank you.

Mr. CUKIER: Thank you.

HANSEN: You're listening to NPR News.

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