The Japanese government on Wednesday estimated the direct damage from a deadly earthquake and tsunami that struck the country’s northeast this month at 16-25 trillion yen ($185-$308 billion), making it the world’s costliest natural disaster.
It said the estimate covered damage to roads, homes, factories and other infrastructure and eclipses the $100 billion loss tally after the 1995 Kobe quake, until now the highest.
The figure does not include losses in economic activity from planned power outages or the broader impact of a crisis at a stricken nuclear power plant in Fukushima, where work crews are still struggling to prevent further radiation leaks.
“The impact from the planned power outages is likely to be significant,” Fumihira Nishizaki, director of macroeconomic analysis at the Cabinet Office told reporters.
The upper end of the estimate range would amount to about 6 percent of Japan’s gross domestic product.
“This quake will cause the condition of Japan’s economy and output to be severe,” Bank of Japan Governor Masaaki Shirakawa told a parliamentary committee.
Speaking separately, central bank board member Ryuzo Miyao repeated the bank’s pledge to take appropriate policy action if needed to support the world’s third-largest economy.
In its initial response to the disaster, the central bank started pumping trillions of yen into the money market to prevent it from seizing up and doubled its asset buying scheme, which Shirakawa served to improve corporate funding conditions.
The injections brought deposits held with it by lenders to a record high above 40 trillion yen [$495 billion] and well above a previous peak reached in 2004 when the central bank pursued a policy of deliberately flooding the financial system with cash known as quantitative easing.
Last Friday the BOJ and its G7 central banks joined in a rare currency intervention to keep a rallying yen from inflicting further damage on the export-reliant economy.
The Japanese currency has crept up from post-intervention lows, but hovered well below its peak of 76.25 to the dollar at around 80.85 after the group sold a total of $6.5 billion worth of yen, much less than initially thought.
While economists expect Japan’s biggest reconstruction push since the post-World War Two period to give the hard-hit economy a badly needed lift in the second half of the year, they warn that power shortages are the greatest risk to such a scenario.
The 9.0 magnitude quake that struck on March 11 unleashed a deadly tsunami that wiped out whole communities, leaving nearly 22,000 people dead or missing and 350,000 homeless, and crippling the biggest power utility in Japan and Asia.
Tokyo Electric Power Co, which serves Tokyo and the surrounding area that accounts for 40 percent of Japan’s economic output, lost about 20 percent of its operating thermal and nuclear power generation and is unlikely to get enough back online to meet peak summer demand.
The utility is unable to get much surplus power from operators in the undamaged western part of the country because they operate with a different power frequency.
Toyota Motor Co., the world’s top automaker, could be losing about $74 million of profit for every day its 12 assembly plants remain shut, Goldman Sachs estimated, and it is just one of dozens, if not hundreds, of Japanese manufacturers facing disruptions.
The first official damage estimates will serve to map out disaster relief plans and emergency budgets to fund recovery costs.
A senior official from the ruling Democratic Party said on Tuesday that at least two and perhaps more emergency budgets would be needed to pay for the reconstruction, with first focused on immediate disaster relief, possible in April or May.
The government has yet to decide how it will finance the reconstruction effort, which some analysts say would require more than 10 trillion yen and most certainly would require new borrowing.
($1 = 81.065 Japanese Yen) (Additional reporting by Tetsushi Kajimoto; Writing by Tomasz Janowski; Editing by Kim Coghill)
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