Current Event Summary - Article Example

Japan Adds to Global Economy Woes1 of the Subject Name of the Concerned Professor March 15, 2011 Japan Adds to Global Economy Woes The recent earthquake and Tsunami that hit Japan are threatening to jeopardize the Japanese economy. Besides, the global economy, already suffering from political turmoil in the Middle East and the soaring oil prices, is poised to get more unstable owing to the crisis in Japan.

The news of ongoing troubles in the Fukushima Daiichi nuclear reactor has spread like wild fire in the Asian markets and they are apprehensive and doubtful about the prospects of Japan recovering from this natural disaster in the near future. The worst hit is the Japanese auto sector and the manufacturing sector. With plants being closed, erratic power supply and mounting logistics and supply chain problems, things do not portend to go fine in the weeks to follow. The Tsunami has also severely derailed the Japanese tourism industry.

The price of regional products like rubber are also sliding down, fearing a drop of demand in Japan. Japanese stock markets have experienced the worst meltdown, since the onset of the economic recession. The neighboring equity markets like China and Hong Kong have also registered a sharp decline. The shares of major Japanese companies like Tokyo Electric Power Corporation and Toshiba Corporation declined by more than 20 percent. In the recent times, the Global Economy had recovered a little, stimulated by the booming Asian economies.

The economists predict that if Japan succeeds in successfully controlling nuclear problems, things may improve a little for good. However, considering the fact that many growing Asian economies are closely integrated with the Japanese economy, the trouble in Japan may also slowdown their pace. One potential factor worsening the trouble is the inability to quantify the damage to the Japanese economy and to predict, when the things will get back on the track. Many Japanese and regional companies are already closing the plants temporarily, going by the rampant power cuts and mounting logistics problems.

However, some regional markets like China and India predict gains in the long run, as the demand for infrastructure inputs like finished steel and cement are bound to raise, once the reconstruction drive in Japan gains pace. The regional food producers also expect growth, considering that the Tsunami has already destroyed the production capacity in Japan, the nation may look towards regional markets to procure food products. Yet, the companies that relied for their supplies on Japan like electronic goods manufacturers, auto manufacturers and seafood importers are pessimistic about the future.

The contingency plans designed by these business concerns will help a little, but will definitely not yield any long term solution, unless the Japanese economy recovers quiet early. The Asian companies, which earlier procured inputs from Japan, are exploring alternate sources like China. Unless these companies find a way out to compensate for the shrinkage of supplies from Japan, they are poised to suffer losses. The Japanese disaster has conclusively raised a tough situation for the global economy in general and the Asian markets in particular.

References Barta, Patrick., Takahashi, Yoshio,. & Davis Bob. (2011, March 15). Japan Adds to Global Economy Woes. The Wall Street Journal. Retrieved March 15, 2011 from http://online.wsj.com/article/SB10001424052748703566504576202491300989306.html?mod=WSJINDIA__MIDDLTopStories