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Global Recovery

Japanese Disaster – Will It Derail Global Recovery?

Nathan Lear
Partner/Private Client Adviser
21 Mar 2011

What has occurred in Japan over the past week is undoubtedly a terrible human tragedy that has captivated the world. As the clean up continues our attention turns to how much this disaster will impact Japan financially and the global economy?

The reality is, while the events have been devastating, the economic impact should be less than feared and unlikely to derail global recovery.
In the short term the disaster will depress Japan’s economy as a result of damage to power supply, factories, transport and infrastructure. However, according to several leading economists it will have about as much impact on the global economy as the recent earthquake in New Zealand, which was minimal. It is estimated that the disaster will only dent Japanese growth by around 0.2 to 0.5% of GDP.

While the crisis is likely to slow Japanese growth for a few months, the country is likely to see a strong rebound particularly in the second half of the year as they begin the rebuilding process. This is a typical pattern seen after natural disasters, such as Hurricane Katrina in 2005 or the Kobe earthquake in Japan in 1995.

One difference this time is the threat of a nuclear catastrophe which would result in a far more disastrous outcome if it occurred. From all reports this threat is disappearing as time passes.  

In terms of the impact to financial markets, the initial reaction has been negative. This disaster occurred during a time when the world is already on shaky ground adding to the worry list for investors. This includes unrest in the Middle East and oil prices, ongoing European debt concerns and rising inflation in the Asian market. However any negative impact from the disaster in Japan is likely to be short lived. 

With  regard to Australia, we are likely to benefit from increased demand for our raw materials as Japan rebuilds.  


Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.