TOKYO (MNI) – The government said on Wednesday that the massive
damage inflicted by the March 11 earthquake on Japan’s northeastern
Pacific coast is estimated at up to Y25 trillion ($309 billion), the
largest-ever from a disaster in the country’s post-war history.

The official estimate, which was the first released after the
violent quake and tsunami swept through fishing ports and farmlands, was
based on the assumption that 80% of existing buildings and factories in
Iwate, Miyagi and Fukushima prefectures in northern Japan were damaged.

The estimated damage would exceed the toll of around Y9.6 trillion
from the Great Hanshin Earthquake, which hit western Japanese port city
of Kobe on Jan. 17, 1995.

The government also presented a more conservative estimate of the
damage at around Y16 trillion, on the assumption that only 30% of the
buildings and plants were damaged in the three prefectures.

Fumihira Nishizaki, director of macroeconomic analysis at the
Cabinet Office, told reporters that the impact of the quake will be
reflected in Japan’s GDP in the January-March quarter at the earliest.

The drag from the quake and tsunami includes lower industrial
output at damaged factories, lower production of final goods amid
shortages of parts supplies and power shortages in eastern Japan.

On the other hand, investment to be made for reconstruction of the
quake-hit zones would push up total output in goods and services.

Excluding the negative impact of restricted power supply, GDP is
estimated to be pushed up by an annualized 0.25-0.75 percentage point in
the first half of fiscal 2011 (April-September) and by 0.75-1.5
percentage point in the second half ending March 2012.

Capital investment as part of reconstruction efforts by both the
private and public sectors is expected to rise Y2-3 trillion in the
first half of fiscal 2011 and Y3-5 trillion in the second half.

But Nishizaki said the official estimates do not factor in the
negative impact of radiation leaks from the quake-hit Fukushima Daiichi
nuclear power plant, the quake’s dampening effects on business and
household sentiment and any influence of stock and foreign exchange
markets on the real economy.

If the negative impact of restricted power supply is factored in,
GDP growth could be significantly lowered. Nishizaki said, “Negative
growth could continue.”

The government has forecast that the fiscal 2011 GDP will grow 1.5%
from 2010, but Nishizaki declined comment on how this figure should be
revised. Some economists projected that the fiscal 2011 GDP will show a
contraction, which would be first drop in two years.

tokyo@marketnews.com
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