Japan Adds to Global Economic Woes by Patrick Barta, Joshio Takahashi, and Bob Davis - Essay Example

?The article published in the Wall Street Journal on March 15, called Japan Adds to Global Economic Woes written by Patrick Barta, Joshio Takahashi, and Bob Davis is a very informative piece of literature. The main thesis of the article is that the catastrophic earthquake that hit Japan has affected Japan so much that it will have global economic repercussions. Natural disasters are unpredictable events that can have a deep impact in an economy. The normal economic cycle associated with natural disasters such as earthquakes is for the economy to have a temporary slowdown as production seizes which is then followed by reconstruction spending and a recovery in the economy. Japan is considered the strongest economy in the Asian region. The Asian economies are dependent on Japanese trade and imports. The earthquake that hit Japan has completely disrupted the entire economy of the island of Japan. The financial markets of Japan have been negatively impacted by the event. The Toyko shares drop by 11% on March 15, 2011 and by 6.2% on Monday March 14, 2011. The total combined drop in value was 17.2%. Along with the news and effects of the earthquake there is currently a lot of speculation due to the nuclear scare the people of Japan are facing. There is a possibility that the damage in the nuclear plants released radiation into the atmosphere which would cause environmental damage to the ecology and to humans. Millions of Japanese inhabitants are at risk of exposure to radiation if the worse scenario becomes a reality. The uncertainty associated with the nuclear condition of Japan is causing panic among the investor community and within the population of Japan. A major problem that the region of Japan is facing since the earthquake hit them is that its supply chain logistics have been altered. The supplier logistics have been dislocated throughout Japan due to restrictions on using highways for freight has been imposed. When companies are unable to receive raw inventory on time it can cause a firm to suffer from a shutdown. Hundreds of corporations in Japan have close down since the earthquake hit. Along with logistics another problem companies are facing is a lack of stability in its power grid. Electricity shutdowns have been occurring throughout the entire region of Japan. Without electricity companies are unable to produce. Another industry that has been hit hard by the event is the tourism industry. People are scare to travel to Japan right now. Many flights in and out of Japan have been cancelled. Tourism brings in a lot of money because the people that come to Japan spend money during their visit to the nation. There are many social aspects that must be considered after the earthquake. The government of Japan has to invest resources in order to find shelter for the thousands of victims that lost their homes. The fact that food and oil prices are high hurts in the recovery process. Higher prices on food will hurt the ability of the government and the non-profit organizations to purchase sufficient food to feed the victims. The medical industry had a huge increase in the demand for its services after the earthquake. Thousands of people were injured as a result of the earthquake. Japan needs the immediate importation of medical professionals in order to meet the demands for medical services as a result of the crisis. The rise in oil prices is another factor that is negatively impacting the Asian economies. A rise in the price of crude oil has inflationary consequences due to the fact that oil has so many derivative products and because virtually all transportation vehicles use gasoline to operate. In the next few months Japan is going to experience a major boom in its construction industry. There is going to be a high demand for steel as well as many other construction products. Some companies are going to benefit from the earthquake. Union Frozen Products the world largest manufacturer of canned Tuna is already predicting that there is going to be a rising demand for its products as Japanese people look for cheaper food alternatives. The unemployment rate is expected to go up in Japan due to the destruction in the region and the lack of stability of the nation’s power grid. Two factors that are creating lots of economic uncertainty are not knowing the full extent of the damage and how long the production facilities in Japan are going to stay offline. The article was very well written and it has lots of good economic data regarding the impact the earthquake had on Japan. I became a more educated person on the economy of Japan as a consequence of reading this article. One of the major points that were discussed in the article is the claim that until Japan does not control its nuclear crisis its economy will not be able to be stabilized. I complete agree with the authors because nuclear spills can have a devastating effect on the environment and on the health of the people. Nuclear radiation can cause cancer and many other illnesses. The country’s health system could collapse in the long run if there is a nuclear spillage in Japan. Despite the article having lots of good information the author’s thesis claim has not defended well in the article. The authors failed to create a correlation of how the earthquake damage hurt the global economy. Their emphasis was on the micro economy of Japan. I thought that the article lacked a clear analysis of the impact the nuclear crisis could have on the economy of Japan and its repercussion worldwide. The argument associated with the medical risk to the population was not mentioned at all. The article did not mention either the efforts that are already underway to help the people affected by the quake. A lot of non-profit organizations such as Feed the Children have already collected thousands of dollars that will be use to purchase food and medicine for those in need. My overall evaluation of the paper is that it served a great purpose. The authors utilized a lot of economic concepts throughout the article. There were plenty of examples of the use of economic metrics to provide the reader with real data. The weaknesses of the article were offset by its strengths. The title of the article was a bit ambiguous due to the fact that the authors did not emphasize on the global repercussions of the Japan quake. There is a concern among the economic community that a shutdown of Japan could lead to a global recession. The production capabilities of Japan along with its influence in the Asian economies are two of the reasons why Japan is such an important global player. Japanese companies such as Honda, the world’s leading car manufacturer, are important players in the global economy. The vehicles Honda producers are part of the supply chain of thousands of companies worldwide. The Japan 9.0 earthquake and the subsequent tsunami that followed was the fifth strongest earthquake ever recorded. A natural disaster of that magnitude is going to have devastating economic effects in the region affected. In order to relief the situation Japan needs the assistance of the global community. Work Cited Page Wsj.com. 15 March 2011. “Japan Adds to Global Economy Woes.” Wall Street Journal. 15 March 2011. Read More