Effect of Earthquake on linked Japan, U.S. Economies

By: Sherene Tagharobi Email
By: Sherene Tagharobi Email
Japan may be thousands of miles away but Friday

CORRECT YEAR - Earthquake-triggered tsumanis sweep shores along Iwanuma in northern Japan on Friday March 11, 2011. The magnitude 8.9 earthquake slammed Japan's eastern coast Friday, unleashing a 13-foot (4-meter) tsunami that swept boats, cars, buildings and tons of debris miles inland. (AP Photo/Kyodo News) JAPAN OUT, MANDATORY CREDIT, FOR COMMERCIAL USE ONLY IN NORTH AMERICA

Japan has been the number two economy for decades and is a major trading partner of the U.S.

"We sell lots of products to the Japanese," said Ethan Segal, associate professor of history at MSU. "They sell lots of products to us and there are many jobs on both sides of the pacific contingent upon both economies remaining strong.

So far so good, says Segal, a Japan expert. The yen actually gained value Friday.

"Financial speculators assume the Japanese government will put a lot of effort into the recovery so that short term in Japan there should be jobs in construction," said Segal.

All that rebuilding will worsen Japan's long term debt. But in the short term, American retailers of Japanese products -- from electronics to cars -- could be playing the waiting game.

"Honda, Toyota, Sony all temporarily shut down their manufacturing faciilities," said David Griffith, professor of marketing. "It could be a shortage of vehicles."

It may still be costing you a fortune to fill up at the pump but believe it or not the price of oil actually dropped Friday morning. Some experts say that's thanks to less demand for oil typical after a natural disaster.

After going up for about three weeks they actually have fallen back a bit primarily due to risk aversion but also having less demand.

Japn lies on the "ring of fire" -- an arc of eathquake and volcanic zones stretching around the Pacific where about 90 percent of the world's quakes occur. Its last major quake was a seven point two in Kobe about fifteen years ago.

"Japan is about as prepared as a country could be for these types of disasters," Segal said.


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