POSTED: 05:43 a.m. HST, Mar 23, 2011
LAST UPDATED: 02:32 p.m. HST, Mar 23, 2011
TOKYO >> Japan's government said the cost of the earthquake and tsunami that devastated the northeast could reach $309 billion, making it the world's most expensive natural disaster on record.
The extensive damage to housing, roads, utilities and businesses across seven prefectures has resulted in direct losses of between 16 trillion yen ($198 billion) and 25 trillion yen ($309 billion), according to a Cabinet Office estimate Wednesday.
The losses figure is considerably higher than other estimates. The World Bank on Monday said damage might reach $235 billion. Investment bank Goldman Sachs had estimated quake damage would be as much as $200 billion.
If the government's projection proves correct, it would top the losses from Hurricane Katrina. The 2005 megastorm that ravaged New Orleans and the surrounding region cost $125 billion, according to the Insurance Information Institute.
Japan's estimate does not include the impact of power shortages triggered by damage to a nuclear power plant, so the overall economic impact could be even higher. It also leaves out potential global repercussions.
"The aftermath of the tragic events in Japan will obviously alter the domestic economy," said Takuji Aida, an economist at UBS Securities Japan, in a report. "However, Japan's position in the global economy is such that there must also be some transmission of the shock to other parts of the world."
The Cabinet Office suggested, however, that the economic hit could be softened by the expected upswing in public works and construction as the region rebuilds.
The 9.0-magnitude quake and tsunami on March 11 laid waste to Japan's northeastern coast, killing thousands of people and triggering a crisis at a nuclear power plant. Tens of thousands of people living near the plant were evacuated.
Utilities have imposed power rationing, many factories remain closed and key rail lines are impassable.
Toyota Motor Corp., the world's No. 1 automaker, has halted auto production since March 14 because of difficulty securing components, including rubber parts and electronics. By Sunday its lost production will reach 140,000 cars.
The company said Wednesday it will delay the launch of the Prius hybrid minivan in Japan due to disruptions in parts supplies.
Toyota spokesman Paul Nolasco said the automaker initially planned to roll out the Prius minivan in April. But the disaster has crippled suppliers and destroyed shops, forcing Toyota to postpone the launch.
Another Cabinet Office economic report released Wednesday underscored the new challenges facing Japan, which had been on the mend from a lull in growth late last year.
"The economy is moving toward recovery, but its self-sustainability is weak," it said.
More broadly, the Japanese economy has been lackluster for two decades, barely managing to eke out weak growth between slowdowns. It lost its position as world's No. 2 economy to China last year and is saddled with a massive public debt that, at 200 percent of GDP, is the biggest among industrialized nations.
The government plans to introduce a supplementary budget to tackle reconstruction, though Cabinet members have said additional budgets will probably be needed down the road.
Speaking to the upper house budget committee Tuesday, Finance Minister Yoshihiko Noda said the country's deteriorating public finances will not deter the government from reconstruction spending, according to Kyodo news agency.
Cabinet Office spokesman Noriyuki Shikata expressed confidence that the country could handle the massive task that lies ahead.
"This is not something that the Japanese economy cannot overcome," he told reporters Wednesday.
The government also reportedly plans to inject public money into banks to help support lending as companies rebuild. It may finance that from a fund of 11 trillion yen ($135 billion) that is still available under a law on emergency support to banks passed after the 2008 collapse of Lehman Brothers.