Northeastern Japan’s battered landscape looks like the end of the world, said Binyamin Appelbaum in The New York Times. But we often overestimate the economic impact of disasters “because of our tendency to generalize from devastating images and anecdotes.” In fact, the economies of Japan and the rest of the world are likely to shake off the effects of the crisis in a year or less. Even very large disasters often have surprisingly light impact on economic growth. This one could act as a “savage stimulus” to generate furious reconstruction activity and rouse Japan from its two-decade-long doldrums. That’s possible, said Rick Newman in USNews.com. But only if Japan gets those damaged nuclear reactors under control and restores the nationwide electrical power grid. An extended impairment of the grid could “derail Japan’s industrial economy” and have a telling impact on the global economy.
That’s putting it too mildly, said Sean O’Grady in the London Independent. A nuclear meltdown would “trigger an economic meltdown.” Not only would it deal a “grievous and permanent blow to Japan’s already fragile prospects for growth,” it would cripple business and consumer confidence around the world. “Giants such as Toyota provide jobs and investment globally,” and if they can’t operate at full capacity for a lengthy period of time, global growth rates could slow. Japan’s indebtedness will hinder any recovery, said Elizabeth MacDonald in FoxBusiness​.com. “Japan desperately needs capital for its recovery efforts,” and it is unlikely to find all it needs in its once-enormous pool of consumer savings. The country’s millions of retirees have already stopped saving and started spending, and they may need to step up their withdrawals even further “in this time of crisis.” If so, then Japan will either need to borrow on world markets—which will charge a premium to lend to a country that has “committed hara-kiri” by allowing its public debt to climb to twice its GDP—or sell some of its $882 billion in U.S. Treasury bonds. Either course will drive global interest rates up and growth down.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Create an account with the same email registered to your subscription to unlock access.
-
Issue of the week: Raising the minimum wagefeature How will raising the federal minimum wage from $7.25 to $9 an hour affect the economy?
-
Issue of the week: Breaking up the big banks
feature There’s a growing realization that we need to end the taxpayer guarantees that Dodd-Frank left in place.
-
Issue of the week: The death of daily deals?
feature This is a “winter of discontent” for daily deal companies Groupon and LivingSocial.
-
Issue of the week: CEOs tackle the deficit
feature America’s top business leaders sent Congress an open letter urging immediate action on the $16 trillion national debt.
-
Issue of the week: Does Wall Street need speed limits?
feature High-frequency trading now accounts for as much as 70 percent of market volume.
-
Issue of the week: Victory for a bank watchdog
feature A New York state financial regulator accused a London-based bank of laundering $250 billion for Iran.
-
Issue of the week: A former megabanker’s conversion
feature Sanford Weill, the architect of the modern megabank, now favors the end of too-big-to-fail banks.
-
Issue of the week: Libor scandal rocks banking
feature The interest rate scandal is just beginning and may soon engulf at least a dozen other major banks.