Australian companies with operations in northern Japan appear to have escaped relatively unharmed from Friday’s earthquake and tsunami, but the widespread disaster is expected to have a severe economic impact.
Japan’s struggling economy is now in crisis after the record 8.9 magnitude quake and a 10 metre wall of water devastated the country’s north east coast, killing at least 1,200 people.
Authorities have since been forced to take emergency action to avoid a nuclear power station explosion, after officials confirmed two meltdowns have occurred at two reactors and could occur at four more.
Japan’s nuclear industry provides around a third of the nation’s power needs, with the government warning the shutdown of reactors will lead to a shortfall in electricity supply, resulting in power outages.
The reactor threat has sparked a renewed global debate about the safety of the nuclear power industry, with analysts predicting there will be higher demand for natural gas and possible pressure on uranium stocks.
Professor Andrew O’Neil, director of the Griffith Asia Institute at Griffith University, says any serious disruption to Japan’s nuclear industry will impact the country’s ability to fully recover.
“This will have serious implications for Australia, a major security of Japan and a country that still relies on the Japanese market for the export of a large portion of its resources base,” O’Neil says.
Many top Japanese firms, including car companies Toyota, Nissan and Honda, have suspended all production. Experts warning local consumers can expect short-term price rises for cars and household appliances in addition to insurance premium hikes.
Meanwhile, Australian officials are still trying to contact more than 1,000 Australians in Japan, but are yet to confirm any casualties.
Companies including NAB, ANZ Banking Group, the Commonwealth Bank, BHP Billiton, property developer Lend Lease and logistics group Toll Holdings all have offices in Tokyo, which is south of the quake’s epicentre.
Although some companies are still assessing the extent of the damage, and have struggled to communicate with staff in the region, reports have generally been positive.
Fortunately, there are few Australian business operations in the Sendai region, which was hit hardest by the earthquake and tsunami.
Investors are bracing for further substantial losses on the Australian sharemarket after fresh concerns about the global economic recovery sent local stocks tumbling to their worst weekly performance in nine months.
The benchmark ASX 200 fell 4.5% this week as nervous investors piled out of shares and ploughed their money into safe havens such as gold.
CMC Markets chief market strategist Michael McCarthy says the Australian sharemarket may fall by another several hundred points in the coming weeks.