For Japan, the earthquake and tsunami could not have come at a worse time. Already, the Japanese economy is battling to overcome recession. The yen has been stronger which has hampered exports. And it is burdened with debt that is twice the size of the US$ 5 trillion economy. To make matters worse, the earthquake and tsunami has spawned fears of a nuclear disaster at its nuclear reactors. Plus, power has been disrupted and could take some time before it is fully restored. Factories and oil refineries in the North East region have also been shut down. What this essentially means is that Japan is in the danger of slipping into recession once again. In response Japan's central bank poured a record 12 trillion yen (US$ 146 bn) into the financial system. The Bank of Japan governor has indicated that it is ready to unleash massive liquidity to prevent another prolonged recession in the economy. Japanese interest rates are also at an all time low. Whether an expansionary monetary policy will help revive the fortunes of the world's third largest economy is questionable. So far such policies have certainly not done much for the US and Europe which are also mired in recession.
5 years ago
