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OECD Statement on Japan: Japan: Economic impact of the earthquake
The 11 March 2011 Tohoku Pacific earthquake was the strongest ever recorded in
Japan and triggered the country’s worst disaster of the post-war era. We express
our deep regret at the loss of life and offer our condolences to those affected
by this tragedy.
The four prefectures most affected by the earthquake (Iwate, Miyagi, Fukushima
and Ibaraki) account for 6 to 7% of Japan’s population and economic output. The
destruction caused by the earthquake and the subsequent tsunami is so large that
it is not possible at this point to estimate its economic impact. Such disasters
reduce potential growth through damage to tangible fixed assets and injury and
loss of life. The 1995 Kobe earthquake, for example, resulted in damage
estimated at around 2% of GDP. The area hit by the Kobe earthquake, as a share
of GDP, was roughly comparable to the area devastated by the Tohoku Pacific
earthquake. Nevertheless, the impact of the 11 March disaster may be much worse,
given the greater severity of the earthquake and the subsequent tsunami.
Moreover, a series of aftershocks continues to shake Japan.
In particular, the earthquake and tsunami seriously damaged nuclear power plants
in the Tohoku region, which depends heavily on such plants for electricity.
Measures to contain overheating at some reactors may render them unusable. An
estimated one-fifth of Japan’s domestic nuclear capacity has been closed at
least temporarily since the earthquake, resulting in electricity shortages. The
authorities plan rolling blackouts in the eastern half of Honshu for at least
several weeks beginning 14 March.
Power shortages and the need to repair the damage caused by the earthquake and
tsunami has forced many factories to suspend production, including in the car
and electric equipment sectors. The adverse effects in areas hit by the disaster
may spread to other areas of the country and overseas due to shortages of parts.
Consequently, industrial production in March is likely to fall, followed by
further weakness in April.
The Tohoku Pacific earthquake occurred as the Japanese economy appeared to be
emerging from a lull in the latter part of 2010. While disasters reduce economic
activity in the short run, subsequent reconstruction efforts tend to boost
output growth. The government has started discussions on reconstruction
measures. At present, fiscal resources appear limited to the remaining 0.2
trillion yen (0.04% of GDP) reserve fund in the FY 2010 budget and the 1.1
trillion yen (0.2%) reserve in the FY 2011 budget. However, supplementary
budgets to finance reconstruction efforts will expand available fiscal
resources. In the wake of the Kobe earthquake, for example, the central
government spent about 5 trillion yen (1.0% of 1995 GDP).
At its 14 March meeting, the Bank of Japan’s Monetary Policy Board decided to
double the size of the asset purchase programme, originally introduced in
October 2010, from 5 trillion yen to 10 trillion yen (2% of GDP), while
providing ample liquidity. The central bank is also monitoring the impact of the
earthquake on financial markets and financial institutions. Equity prices have
fallen sharply since 11 March, with the benchmark Nikkei average down by 16%.
Sales by foreigners may have helped reverse initial upward pressure on the yen,
perhaps reflecting the repatriation of overseas assets by Japanese insurers.
The OECD will be working closely with the Japanese authorities in the coming
months and is ready to assist them in any way we can at this difficult time,
including by helping them assess the impact of the tragedy on the economy and
determine the necessary policy responses.
Buildings are reported to be shaking in Tokyo after a new 6.2 magnitude earthquake hits the country, with CNBC's Sri Jegarajah:
EU: The Austrian Vice Chancellor and Finance
Minister today called on the Irish Government to offer a gesture for securing a
lower interest rate on the EU-IMF bail-out.
"If Ireland wants to change what we have already adopted, on the interest
rates for example, it's up to the new government to make a new proposal,"
Josef Pröll said following the Ecofin meeting of EU finance ministers in
"They can send a signal to Europe, like the Greek government for example.
They've got a longer time to pay the loan back, but on the other hand they
proposed to privatise a lot of enterprises worth €50bn," he said.
Spain today sold €5.5bn worth of bonds in an auction of 12 and 18-month bills
today, following last week's downgrade by Moody's Investors Service.
Spain's Treasury said it sold €3.97bn in 12-month bills at an average yield
of 2.128%, down from 2.41% in mid February. It also sold €1.53bn in 18-month
bills at an average yield of 2.436%, down from 2.938% in the last such auction
Murray Jennex, associate professor at San Diego State University, assesses the gravity of the current radiation levels in Japan:
Irish Life & Permanent: IL&P issued a statement to
the Stock Exchange today confirming the receipt of Irish Nationwide deposits of
Irish Retail deposits of €2.7bn;
Irish Corporate deposits of €0.5bn; and
Isle of Man deposits of €0.4bn.
IL&P also received assets supporting these deposits which
Senior NAMA bonds with a nominal value of €2.9bn; and
Irish Government and Irish financial institutions
Government guaranteed bonds with a nominal value of approximately €0.7bn.
Consideration paid by the group in respect of the rransfer
is approximately €2.3m.
Under the transfer 237 employees of INBS have transferred to the Group with the
selected INBS deposits. No branches of INBS were acquired.
The acquisition by the group of the selected deposits and associated assets of
INBS improves the loan to deposit ratio and liquidity position. As of 31
December 2010 the loan to deposit ratio of the banking business was 249%. The
addition of €3.6bn of deposits at that date would have reduced the loan to
deposit ratio to approximately 200%. Total depositors acquired is approximately
AIB: Allied Irish Banks said today
that rates for new residential owner occupier and buy-to-let mortgages
will rise from close of business today.
The changes are as follows:
In New York Tuesday, the
Dow fell 201 points or 1.68% to 11,792.
The S&P 500 dropped 1.63%
and the Nasdaq dipped 1.67%.