In my previous post a couple days ago, and referring to the earthquake and tsunami that devastated much of Japan's Northeast coast, I asked the question Are natural disasters good for the economy? While the answer then was a conditional Yes, it will probably be a conditional No when looking at that same question today, especially when considering yesterday's post by Jim Fulcher on how the disaster in Japan has far-reaching implications.

 

Japan's supply chains are still under pressure, writes Patrick in the Supply Chain Management Review, and he is very right. I usually watch the BBC News World Business Report every morning, and today's reprot focussed specifically on Japan. With the Tokyo Stock Exchange closing some 5% up today, at least the Japanese have regained their confidence, showing that they will be able to pull themselves out from the rubble (pun intended). However, the road to recovery is long and not easily walked.

 

Japan does play a major role in the world's supply chains and with many ports unable to operate that will hurt exports as well as imports. Japan's Crisis adds new risks to global recovery, as the Wall Street Journal points out. The WSJ article featured two interesting graphics:

 

japan-merchandise-export.jpg

The figure indicates that Japan's major market lies in Asia and China. If these exports are hampered that in turn will hamper these countries, and inparticular China, in exporting their goods to Europe and the US.

 

japan-share-world-export.jpg

This figure shows the sectors that are most likely to be hit the worst by the current crisis in Japan: The automotive sector and the electronics sector. Toyota has reportedly shut down and/or reduced production at some of their facilities, and integrated circuits are hopefully available with other manufacturers. If not, we could have a reprise of the fire that severely impacted mobile phone makers Nokia and Ericsson in 2000. Reuters.com aptly named their story on integrated circuit problems as the chips to ships supply chain, and no we're not talking about the export of French fries here...

 

CNBC reports how the current Japan supply chain risk will reverberate globally, leaving perhaps many economic aftershocks in its wake. And Boeing is likely going to be hit hard, with Japan being a major supplier of parts and components for the 787 Dreamliner. And these are just a few stories that are beginning to emerge as reality hits home.

 

Considering how global trade and thus supply chains linkages really have become, there are probably very few products and supply chains that will be totally unaffected by the recent events in Japan. While some may profit from this, others may not, making this a Zero-Sum game. However, for the overall world economy, the outcome is still uncertain. Disasters do impact supply chains, as recent research shows.

 

Good for the economy? Well, what do you think?

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