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Devastation in Japan will impact Australian trade

Devastation in Japan will impact Australian trade article image

The devastating earthquake, tsunami and subsequent nuclear explosions in Japan are expected to financially cripple one of the world’s biggest economies in the short-term. While Australian trade officials have so far declined to comment, economists predict the ramifications of the disasters in the East Asian state will impact trade around the world as the Japanese people and government divert spending towards rebuilding at home. A spokesperson for the Department of Foreign Affairs and Trade said it is too early to make an assessment of the trade and economic impacts of the earthquake and tsunami. Spokesperson for Austrade Lincoln Wright said it is too soon to quantify the impact on trade between the two nations as Japan is "very much still in a search and rescue phase". But Japan is one of Australia’s most important trading partners, buying exports worth A$37.1 billion in 2009-10. It is one of Australia’s biggest markets for coal, beef, iron ore and other metals. Australia’s services trade with Japan is worth A$1.9 billion. Exporters should expect most trade to be suspended as Japan faces the devastating aftermath of the 8.9 magnitude earthquake. The impact is already being felt on the stock exchange with the Japanese bourse plunging overnight. Uranium stocks have taken the biggest hit as Japan struggles to contain hazardous material in the wake of explosions at damaged nuclear reactions. Australia is the world’s third largest producer of uranium oxide, exporting nearly 10,000 tonnes a year to the value of A$1.1 billion. Japan buys about a fifth of Australia’s uranium exports. As nuclear nations around the world reconsider the safety of nuclear power, the Australian uranium industry is expected to contract. Japan is also an important source of tourists for the Australian tourism industry. Spokesperson for the Australian Federation of Travel Agents Jayson Westbury said the "gargantuan" disasters would "decimate" the tourism exchange between Japan and Australia. Japan already has government debt valued at 210 percent of its Gross Domestic Product. The economy is under pressure from a rapidly ageing population and deflation. When the search and rescue phase closes the Japanese government is facing billions of dollars in reconstruction and rebuilding. But economists predict the rebuilding phase will help stimulate the stagnant Japanese economy. While the next quarter will see zero demand from Japan, as rebuilding begins the government will require raw commodities, increasing the demand for Australian exports. With much of Japan’s arable land destroyed, food imports will also rise sharply. Whether the deeply indebted nation can afford the disaster bill is another question. This earthquake was a bigger disaster than the Great Hanshin quake that razed the Kobe region in 1995. The cost of that disaster was approximately US$114 billion, with 6,500 dead and over 150,000 buildings totally destroyed. But manufacturing production was restored to pre-quake levels within eighteen months of the disaster. Within 12 months, export volumes were at 85 percent of trade before the quake. Japan has recovered before, and in time, will recover from this.

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