Tohoku Aftermath on the WW Automotive Industry
Market Researcher IHS iSuppli has come out with loss estimates from the earthquake and tsunami, correlating them to GDP. The Japanese GDP is estimated at $5.5 Trillion. It is the third largest, and around 8% of the WW economy. IHS iSuppli estimates suggest that if loss is around $250 Billion, the rebuild expense will be around $190 Billion. On the other hand, the World Bank estimates that the Japanese earthquake and resulting tsunami could cost the Asian economy up to $235 Billion.
Key risk factors for the Japanese economy are the uncertainty over the nuclear plant at Fukushima (any meltdown/significant incident) and continued shortages of electricity, plus the time taken to repair the significant damage to infrastructure. Combined, these can affect the Japanese industry’s attempts to get back on track. iSuppli’s current GDP forecasts show a lowered outlook for 2011 versus its earlier estimates, followed by a stronger outlook in 2012. Japanese economy may see an output drop over the next few months, followed by a sharp rebound once reconstruction gets underway. Year | Pre-quake GDP Growth | Post-quake GDP Growth | 2011 | 1.3% | 0.8% | 2012 | 1.8% | 3.5% | 2013 | 1.9% | 1.4% |
Source: IHS iSuppli, March 2011 iSuppli estimates that Japans’ debt to GDP ratio may rise by a percentage point, by end 2014, moving to 205% (from 204%). In other words, the ratio is unlikely to affect financing, unless it approaches a tipping point. Short term moves by Bank of Japan are expected to comprise of massive liquidity interventions, while in the medium term: Forex intervention to prevent yen appreciation.

Japanese Automotive Industry
The impact of earthquake in Japan on the automotive industry is yet to be fully realized, the immediate impact was the shutdown of plants in and around the quake hit areas. Shutdown has led