Japan is the world’s third-largest economy and a huge exporter of cars, electronic components and industrial equipment as well as steel, textiles and processed foods. In turn, it’s a voracious consumer of petroleum, imported agricultural products and luxury consumer goods.
Since the earthquake struck last Friday, many of the nation’s largest manufacturers, including automaker Toyota Motor Corp. and electronics maker Toshiba Corp., have been forced to slow or shut down production as they deal with supply chain interruptions, energy shortages and transportation problems.
And while many of those idled plants are expected to come back online soon, questions loom about the lasting effect on the Japanese economy as the country struggles to rebuild. The reconstruction costs could well surpass $100 billion, according to some estimates.
Already burdened with persistent deflation, shrinking foreign investment and massive borrowing, Japan’s economy now faces what could be far darker clouds as it struggles to take measure of the destruction in its northeastern coast. Almost certainly, Japan will be forced to borrow more money, which could drive up the value of the yen, making it harder to export products.