Japan's Central Bank Injects Record Cash Infusion The emergency injection comes as the Tokyo stock market plunged nearly 6 percent, and worries grew about the economic impact of Friday's earthquake and tsunami. Chris Anstey, Bloomberg's managing editor for Asia government and economy coverage, talks to Renee Montagne about the economic consequences of Friday's disaster.
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Japan's Central Bank Injects Record Cash Infusion

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Japan's Central Bank Injects Record Cash Infusion

Japan's Central Bank Injects Record Cash Infusion

Japan's Central Bank Injects Record Cash Infusion

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The emergency injection comes as the Tokyo stock market plunged nearly 6 percent, and worries grew about the economic impact of Friday's earthquake and tsunami. Chris Anstey, Bloomberg's managing editor for Asia government and economy coverage, talks to Renee Montagne about the economic consequences of Friday's disaster.

RENEE MONTAGNE, host:

Also, stock prices in Tokyo took a big hit today, despite dramatic action by the Bank of Japan, which injected billions of dollars into the market to try and boost confidence in the economy.

LINDA WERTHEIMER, host:

The Nikkei stock average lost more than 6 percent. Investors are worried about the financial damage to manufacturers, including critical exporters, who've suspended production.

Among the big share price drops: Nissan and Sony. Both plummeted more than 9 percent. On global markets, oil prices have dropped, as investors try to gauge the impact on energy demand. And in U.S., stock prices opened slightly lower.

MONTAGNE: To talk more about the impact of this disaster on Japan's economy, we called Chris Anstey. He's a managing editor for Bloomberg News in Tokyo.

Thank you very much for joining us.

Mr. CHRIS ANSTEY (Managing Editor, Bloomberg News): My pleasure.

MONTAGNE: Now, the Bank of Japan has injected close to $200 billion into the markets today. How serious is the economic impact? How much in other words, will this help?

Mr. ANSTEY: Well, I think there's two things going on. One is maintaining financial stability in the aftermath of the earthquake and the disaster. And what the Central Bank said it's trying to do with the liquidity injection you referred to, which is in very short-term loan amounts, is to make sure there's enough cash in the economy, that no transactions fail because people and companies cannot access their money.

What our reporting shows is that it's been successful. We've spoken with some debt traders who say that, you know, the money market is operating normally. But the intention is to make sure that there are no bank failures. So that's the sort of the short-term goal. The longer-term concern what is going to be the effect on consumer spending and industrial production, effect on trade? And the economists that we've talked to say that it's very difficult to tell right now.

MONTAGNE: Tell us about the region, then, where the tsunami hit this coast along the northeast. How big of a role does it play in Japan's economy, and what's the nature of that role?

Mr. ANSTEY: The Tohoku region is about eight percent of Japan's economy. And it's got a number of factories. There are auto factories. There's papermaking facilities, beer-making operations, and obviously, the nuclear power facilities that you referred to. It's not the biggest center of industrial production in the country, which stretches from Tokyo, southwest down to Osaka.

A lot of the areas in that region have actually had depopulation for years, as younger people in rural regions have moved to the big cities. So it's actually an area that had already been struggling economically.

MONTAGNE: What about the car industry? How much has that been affected?

Mr. ANSTEY: Well, the automakers, I think, universally have said that they've shut down operations in that region. There's at least one report today saying that Toyota has shut down all of its operations in Japan. Analysts are saying that there's no doubt there will be a significant impact on industrial production, at least in the short-term, and it remains to be seen how quickly they can get everything back on line.

MONTAGNE: But what is the transportation situation around Japan?

Mr. ANSTEY: The train lines to the south and west have - at least out of Tokyo - have restarted. And I've seen reports today that some of the operations to the north are being restored. Just in the Tokyo area, you know, anecdotally, in our office, a fair number of people found it very difficult to get in this morning, as the subway system and an overland train system remains far from its normal capacity.

MONTAGNE: What economic implications does this all have for the rest of the world?

Mr. ANSTEY: Sadly, Japan has not been an engine for global growth for some time. This is an economy that has been slipping for many years. There's been stagnant growth for the better part of two decades. It's an economy that has deflation, not inflation, because there's a lack of demand. It just got surpassed by China in 2010 as the world's second-largest economy.

That said, there's still a significant economy, one of the wealthiest. And if you think about, you know, all the Japanese consumer products and all of the automobiles, you're going to have some impact on the global supply chain. Just as one antidote, J.P. Morgan analysts were saying, at least late on Friday, that they think that the price of oil and the disruptions in the Middle East are a bigger threat to the global economy than what happened in Japan, as tragic as it is.

MONTAGNE: Thank you very much for talking with us.

Mr. ANSTEY: My pleasure.

MONTAGNE: We've been speaking with Chris Anstey of Bloomberg News in Tokyo.

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