Tuesday, November 08, 2011
[IWS] BLS: THE IMPACT of the EARTHQUAKE IN JAPAN on U.S. IMPORTS
IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
Focus on Prices and Spending | Import and Export Prices | Volume 2, Number 9
Current Price Topics: The Impact of the Earthquake in Japan on U.S. Imports
On March 11, 2011, northeast Japan was hit with the strongest recorded earthquake in that nation's history, measuring 9.0 on the Richter scale. The earthquake and subsequent tsunami, which together left more than 20,000 people dead or missing, also damaged much of Japan's infrastructure, especially the country's electric power grid. The economic impact of the disaster on Japan, including its impact on the Japanese export trade to the United States, remained uncertain at the time, in terms of both the availability and prices of Japanese goods.
Despite this uncertainty, and that of the impact of the quake on the world economy, a major earthquake in Japan is not unprecedented. The Hanshin earthquake that hit Kobe on January 17, 1995, offers some insight into what might be expected this time. Although that incident was a considerably smaller seismic event, measuring 6.8 on the Richter scale, the affected regions made up 12.4 percent of Japan's GDP at the time, compared with 7.8 percent in the less industrialized northeast region that bore the brunt of the recent disaster. In 1995, despite extensive damage in the region of the quake, Japanese output actually increased in February and March 1995, following a 1-month drop in production. Even in Kobe, manufacturing output was at 98 percent of prequake levels within 18 months of the disaster.
What was different with the 2011 earthquake was the impact on Japan's overall power grid from the damage done to a major nuclear powerplant. That damage led to rolling blackouts which, combined with the damage from the quake, forced a number of major companies, such as Toyota, Sony, Honda, Nissan, Toshiba, and Texas Instruments, to either shut down or cut back production at multiple plants. Industrial production in Japan, which had risen 1.9 percent from January 2010 to February 2011, plunged 6.4 percent in March in the aftermath of the disaster. Once the power grid was largely restored, and thanks in part to the spare-production capacity in Japan, industrial production recovered to nearly the February level by July.
Interestingly, the value of Japanese exports actually increased in March 2011, but largely because goods had already left Japanese ports at the time of the earthquake. Exports did fall sharply the next 2 months, and in May were 10.3 percent below the value of what was exported the previous May. In subsequent months, the value of exports recovered: August recorded a 12-month increase of 2.8 percent, the first 12-month advance in the measure since February. Despite the August increase in the value of exports Japan recorded a 10.1 billion dollar trade deficit, that same month because of a surge in the value of imports, which was 12.4 percent higher in August than at the same point in 2010. Much of the increase in imports has been in the form of higher fuel imports in an effort to make up for the electricity supply shortages that resulted from the closing of the Fukushima nuclear powerplants.
As regards trade with the United States, Japan is the world's third-largest economy and ranks as the fourth-largest import trading partner of the United States. In 2010, the United States imported more than 120 billion dollars of merchandise goods from Japan, representing 6.3 percent of overall imports. As can be seen in table 1, five broad harmonized product categories—motor vehicles; machinery and mechanical appliances (including computers); electrical machinery; motor vehicle parts; and optical, photographic, measuring, and medical instruments—made up almost three-quarters of total U.S. import trade with Japan.
AND MUCH MORE...including CHARTS, TABLES, and REFERENCES.....
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