Wednesday, March 16, 2011

The reconstruction of Japan after the earthquake will cost almost 130,000 million euros

Following the disaster caused by the devastating earthquake that hit Japan last Friday, the country is now facing a process of reconstruction will cost at least U.S. $ 180,000 million (128,000 million euros), although many analysts say this figure could be even higher. This amounts to 3% of Gross Domestic Product (GDP) and 50% more invested in the country after the Kobe earthquake in 1995.

The world's third largest economy should recover much of its infrastructure, including roads, railways and ports around the country. As acknowledged by Japan's Prime Minister, Naoto Kan, Japan is facing "the worst crisis since the end of the Second World War." The quake struck Friday with particular violence in the region, northeastern Japan, which represents between 6% and 8% of GDP.

In addition, the loss of fixed assets and human capital due to the tremor in addition the price of oil and other commodities, which are also rising. The damage to Japan's economy is not expected to have much impact on the global economic recovery, although much of the amount spent on the recovery will ultimately help Japan and the construction sector in Asia.

Despite early estimates, analysts say that past experience shows that the final cost may exceed original estimates. "There are many uncertainties, not know how much will the power outages and that is a cost that remains, in addition to reconstruction," said Brendan Brown, head of economic research firm Mitsubishi UFJ Securities.

The Kobe earthquake cost between 115,000 and 118,000 million, equivalent to 2% of GDP in 1995. This time, the disaster still evolving, the initial projections of Credit Suisse and Barclays are at 180,000 million. Mitsubishi tests on the balance sheet broader economic loss, which also lost tax revenues, subsidies to companies in the devastated area, loss of productivity with power cuts, besides the same reconstruction.

Early estimates show that only the relocation of a nuclear plant can cost up to 5,000 billion dollars (3.574 million euros). Insurance losses could reach 35,000 million dollars (over 25,000 million euros), excluding the ravages of the tsunami and nuclear plants. For its part, Vanessa Rossi, principal member of the educational researcher Chatham House in London, estimates that 10% of Japan's working capital was lost in the earthquake, equivalent to 20% of GDP, ie billion dollars.

"You could not rebuild extensively over a period of 1 to 2 years. I hope it work 4 to 5 years," he adds.

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