Japan shuts factories

A ferry stranded on a building is seen in Otsuchi, Iwate Prefecture, northern Japan, yesterday, two days after a powerful earthquake-triggered tsunami hit the country’s east coast. AP photo

 Japanese automakers, electronics firms and oil refiners shut key factories after a massive earthquake and tsunami struck the northeast coast, underscoring the challenge facing the government as it rushes to limit the economic blow.

Electronics giant Sony Corp has suspended operations at eight factories including one making optical film that was flooded by the tsunami triggered by Friday’s 8.9-magnitude quake. Nissan Motor halted output at all four of its domestic assembly factories and said restarting them could depend on whether it can get parts.

These are just two in a long list of companies unsure of how quickly they can get their plants back up and running. The widespread damage to infrastructure as well as power rationing after an accident at a nuclear plant could also hamper efforts to resume shipments, even if factory equipment is intact.

Experts say Japan’s economy will suffer only a temporary setback from the quake and could bounce back in a matter of months once spending on the rebuilding efforts starts to kick in. But major technology and auto exporters are expected to be among the hardest hit shares when financial markets open today, reflecting worries over the potential disruption to output and pressure on profits over the short-term. Construction firms, which will benefit from the rebuilding, are set to gain.

“We are worried about the infrastructure—roads, trains, buses, trucks. Not only are the things that get produced going to be delayed but the materials you need to get them produced are going to be delayed. It’s going to bump everything a quarter or two,” said Brian Heywood, CEO of Taiyo Pacific Partners, which has $2 billion invested Japanese shares. “Everyone is going to miss their numbers in the short-term.” Japan’s beleaguered government is struggling to respond to what has developed into the    country’s biggest crisis since    World War 2.

More than 10,000 people may have been killed, almost 2 million people are still without power and another 1.4 million without running water, media said. Leaders are pushing for an emergency budget for relief and reconstruction but the outlay will likely be constrained by the country’s huge public debt, currently twice the size of the $5 trillion economy and growing. Japan spent about 3 trillion yen after the Kobe earthquake of 1995, which caused about $100 billion in damage. Bank of Japan Governor Masaaki Shirakawa said the central bank would provide huge amounts of liquidity to the banking system today to stabilise markets after the quake. (Reuters)


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