Landmark Events: Japan Earthquake, Tsunami, Nuclear Disaster
A magnitude 9.0 earthquake struck Japan on March 11, triggering a tsunami that pushed more than 12 miles inland, crippling four nuclear reactors in Fukushima.
In Tokyo, Japan’s famous tremor resistant architecture survived repeated high magnitude aftershocks.
It was the tsunami along the northern coast that was most devastating. Destruction from fast moving ocean waters was immediate and complete. Early projections of lives lost escalated steadily, quickly climbing past 6,000 people killed and over 10,000 missing.
Tens of thousands of suddenly homeless refugees were directed to shelters that, themselves, struggled to provide aid with insufficient heat, electricity, water, or food.
More far reaching, the tsunami damage extended to four nuclear reactors at the Dai-Ichi power station in Fukushima.
Despite early assurances from the government and Tokyo Electric Power Company, events quickly got out of hand. Water used to cool spent fuel rods went unreplenished. The rods became exposed, threatening a meltdown and spreading ever increasing levels of radiation across the country. We don’t know how this will end.
Japan’s trifecta of disasters created its own financial tsunami, sweeping across all global markets. The U.S. lost our number two trading partner in an instant. Equities markets fell hard. The near certain recovery of the Japanese economy does not change the chaotic repositioning that will occur over the next six months.
Disruption of Japanese production will alter timelines everywhere. Some delays will relate to critical components. In other cases, entire product lines are at risk.
Toyota, for example, is a global automotive manufacturer. U.S. workers’ production hours were cut immediately, pending an evaluation of the supply chain. The Lexus, however, is manufactured entirely in Japan. Dealers that are dedicated to that product have much bigger concerns.
Some Japanese production will be relocated. Honda and Sony have already stated that they will not reopen in Japan. This creates opportunity for those who can move quickly.
Companies dependent upon Japanese production may suffer lost revenue. Automotive and electronics companies are at high risk. Missing components eliminate sales of larger, finished products. Japanese food products may vanish. Radiation-tainted food will not be exported. Domestically, even rice paddies have been obliterated. Japan cannot feed itself.
Companies supplying Japan have enormous potential. Think raw materials, such as lumber, steel, and copper. Construction companies – especially those that can supply power – have an immediate opportunity. Food, of course, is urgent.
The dark side for the U.S. is financial. The Japanese people and companies of Japan need money right now. They are calling in their resources.
Japanese bonds immediately shot up in price (meaning it costs more for Japanese to borrow money.) Japanese companies, desperate to repatriate the Yen (bring their currency home,) drove the price of the Yen higher. Currency traders saw that coming and drove rates higher, still. The G7 pushed back, trying to lower the exchange rate for the Yen. It won’t matter. Expect Japan to liquidate U.S. bonds to get some of their money back.
The U.S. will lose another lender. Interest rates will continue to rise around the world. The U.S. dollar will continue to fall.
Barring political meddling, U.S. employment may well improve over the next six months. However, high taxes and rising prices could cause newly employed Americans to wonder just exactly what it is they are working for.