The scale and scope of the disaster unfolding in Japan following last week's earthquake and subsequent tsunami is heart wrenching. Estimates indicate more than 10,000 lives might have been lost, with millions of people displaced, in what is turning out to be one of the country's biggest natural disasters ever.
Even now, the country awaits with trepidation investigations into unfolding events at several nuclear reactor facilities; two experienced a meltdown over the last few days, although the cores of the reactors are still intact, according to reports.
Our hearts at EBN go out to the people affected, their families, and the nation. This week, the country will continue to grapple with the fallout (sometimes literal?) from this natural disaster. It is expected that efforts to locate and rescue survivors will continue while national leaders also focus on finding urgent accommodation, medical treatment, food, and water for those affected. In many of the coastal cities hit, communication is spotty at best and land transportation has been completely disrupted. The humanitarian crisis has forced Japan to seek international assistance.
The crisis has been exacerbated by severe disruption to power supplies. Huge sections of the country are without power, and it is expected that "rolling blackouts" will continue for some time. On the economic front, Japan also faces mounting problems as a result of this disaster. The economy has been struggling for decades. Only recently, discussions centered on how Japan's national debt had ballooned, and fiscal actions were being initiated to curb this and spark growth.
The debt reduction efforts will have to wait while the country assesses the current situation. In fact, it may have to take on additional debts to deal with the staggering clean-up efforts and rebuilding that must be carried out to restore devastated communities. In response, the Bank of Japan has been taking steps it believes will help restore confidence to the economy.
Today, the bank issued a statement aimed at calming the market, noting it was "conducting its business operations as usual at its Head Office and all of its branches." Despite the statement, it's clear nothing is "as usual" for now in how regulators are moving to restore confidence to the economy. The Bank of Japan's statement included the following:
This morning, the Bank conducted a same-day funds-supplying operation totaling 7 trillion yen, which was the largest amount ever conducted, and a future-day-start funds-supplying operation totaling 3 trillion yen. The Bank will do its utmost to continue ensuring stability in the financial markets and securing smooth settlement of funds, including providing liquidity.
It wasn't enough. On Monday, Japan's main indices slumped, with the Nikkei Stock Average sinking more than 6 percent while many companies operating in the nuclear sector, including Hitachi Ltd. (NYSE: HIT; Paris: PHA), Mitsubishi Heavy Industries, and Japan Steel Works Ltd. fell at a double-digit clip.
The automotive and electronics sectors were not spared. Marketwatch.com reported shares in Toyota Motor Corp. fell 8 percent, Mitsubishi Motor Corp. 12 percent, and Sony Corp. (NYSE: SNE) 9 percent. It's unlikely anyone can at this moment foretell how the earthquake will affect the country's high-tech sector, which in 2010 accounted for almost 14 percent of the "global electronic equipment factory revenue," according to research firm IHS iSuppli.
Japanese chip vendors were also responsible for "one-fifth of global semiconductor production in 2010," iSuppli said. With the transportation infrastructure in shambles and foreign governments warning citizens to avoid Japan, business transactions in the country are certain to come under tremendous pressure in the next weeks. iSuppli's further assessment of the potential impact of the earthquake on the electronics supply chain follows:
The major impact on Japan’s semiconductor production is not likely to be direct damage to production facilities, but disruption to the supply chain. Suppliers are likely to encounter difficulties in getting raw materials supplied and distributed and shipping products out. This is likely to cause some disruption in semiconductor supplies from Japan during the next two weeks.
For now, the country is more focused on the harrowing task of locating, identifying, and burying the dead while giving much needed support to survivors. A few electronic companies have chimed in: Panasonic Corp. (NYSE: PC) last week said it would donate 300 million yen to the relief efforts in addition to supplies like radios, lamps, and batteries. Other high-tech companies will no doubt follow soon.