Just days after being hit with one of the worst earthquakes and tsunamis in history, Japan’s government is struggling to deal with a growing nuclear crisis, with reports that there are now fears about a potential meltdown at a fourth nuclear power plant outside Tokyo.
While the Japanese Government has declared a nuclear emergency at only two of its plants – including the Fukushima Daiichi Nuclear Power Station, which was rocked by an explosion on Saturday – there a reports of radiation leaks with another plant near quake-ravaged Sendai and technical problems at a plant outside Tokyo.
But fears of a complete meltdown at the Fukushima Daiichi plant remain. The plant was flooded with seawater in a desperate bit to cool the reactors, but fears of further explosions remain.
Prime Minister Naoto Kan has attempted to quell fears that the country is facing a major nuclear disaster on a similar scale to the Chernobyl disaster in the Soviet Union in 1985.
“Radiation has been released in the air, but there are no reports that a large amount was released,” the Jiji news agency quoted him as saying.
“This is fundamentally different from the Chernobyl accident.”
Kan has also urged the Japanese people to remain positive and work together as the country prepares to re-open for business this morning.
However, vast parts of the economy around the country remain paralysed by the disaster. Production at many of the nation’s car manufacturing plants remains suspended, and rolling blackouts which will begin today will also cripple businesses.
The economic costs of the disaster are only now being calculated, with most analysts expecting the recovery will cost more than the $US100 billion recovery bill from Japan’s last big earthquake in Kobe in 1995.
While economies typically experience rapid growth after natural disasters as recovery efforts accelerate, economists are concerned that Japan’s huge national debt – which stands at $10 trillion, more than two times GDP – will weigh heavily on post-quake growth.
The fact that the country could face extended blackouts will also slow any economic recovery.
“When we talk about natural disasters, we tend to see an initial sharp drop in production… then you tend to have a V-shaped rebound. But initially everyone underestimates the damage,” Michala Marcussen, head of global economics at Societe Generale, told Reuters.
“Power supply is a critical factor. If power production output is damaged in a sustainable fashion, that could have a durable impact on the economy.”
Australian companies with operations in Japan have spent the weekend trying to ensure the safety of key contacts or staff.
Switched On Media co-founder Scot Ennis told SmartCompany this morning that he has four main clients in Japan, some of whom are serviced from Australia and some of whom are serviced by local partners or contractors.
He has spoken with all company contacts – two of whom are close personal friends – and says he was relieved to hear they are safe.
“I spoke to them all on Saturday and everyone is safe and happy and well, as are their families.”
While he doesn’t expect his clients to be overly affected by the quake, he knows that his Japanese contacts have much bigger worries right now.
“When I spoke to our contacts on Saturday, we didn’t talk about business at all. We just wanted to check that they are safe.
“They are just taking it one day at a time, so we’ll wait to hear from them.”
The biggest impact on the Australian economy is likely to come from a fall in industrial production. Japan is a major export destination for coal and iron ore in the Japanese steel industry, so any major production disruptions could result in a fall in export volumes.
However, Australia could also benefit from demand generated by rebuilding and recovery efforts.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
