Wednesday, March 16

Quake damage estimate for Japan is at $180 (b)

LONDON - earthquake affected Japan reconstruction is a bill of at least $180 billion, or 3 percent of its annual economic output, or more than 50 percent higher than the total cost of the 1995 of earthquake in Kobe.

Although some extreme projections of longer-term costs figures closer to $1 billion over several years project, tally standard similar to that after the Kobe Quake hover around this level used.

Third largest economy in the world, already twice as big as his five trillion dollar issue, with public debt gesattelt must rebuild its infrastructure - roads and rail to makes and ports - on a scale since the second world war no longer.

Moody's investors service warned on Monday that the huge financing needs Japan faces investor confidence in the ability of the country, repay can undermine price gouging borrowing costs.

Moody's lead analyst Tom Byrne said "the earthquake of such a potential tipping point is slightly forward, have moved if also address galvanized Japan's political parties by the crisis are the country's long-term fiscal challenges," in a statement.

The Quake and tsunami have at least 10,000 people, officials estimate, striking a North-East, the accounts for an estimated 6 to 8 percent of gross domestic product, compared with 12.4 percent from the areas affected by the Kobe Quake 1995 killed.

However sees the loss of assets and human capital from Friday quake, which triggered several explosions at a nuclear power plant North of Tokyo, to be far greater. It comes at a time when oil is a 2-1/2-year Summit, floats and other commodity prices remain elevated.

The economic damage should shave only a sliver of world economic growth and tens of billions of dollars spent on the reconstruction of boost should eventually Japan's economy and Asian construction industry.

But analysts also say, first estimates ringing could cost.

"From the experience, there are to underestimate a trend", said Brendan Brown, head of economic research of Mitsubishi UFJ securities.

"There are many uncertainties - we do not know how long power outages will last, and this is a running costs in addition to the reconstruction." It is a loss of output of dislocation. If for two months, is going to dwarf the cost of reconstruction can, "he added."

Rolling blackouts
The Kobe earthquake is estimated to be $115 billion on $118 billion, or 2 percent of GDP in 1995 with regard to costs. This time - in a still unfolding catastrophe - from Credit Suisse and Barclays put initial estimates the cost at $180 billion.

Mitsubishi UFJ securities and Sarasin expect that up to 5 percent of GDP could run the costs.

Mitsubishi estimates take into account a larger economic costs, including a loss of tax revenue, subsidies for different sectors which the affected area, a loss of productivity to rolling blackouts over just reconstruction costs.

Rough estimates show, replacing a nuclear power plant alone can cost $5 billion. Desperate to avert a nuclear meltdown, Japan, sacrifice three of its nuclear reactors had by pumping sea water to cool reactor cores.

Insured losses from Japan's earthquake could be as high as $35 billion, also without tsunami - and nuclear losses.

Story: Disaster in Japan proposes an already ailing economy

Mitsubishi UFJ Brown says historical estimates of the Tokyo earthquake 1923 put destruction as equivalent with 50 percent of annual economic output at the time, but the economic context was so different to make direct comparisons not very fertile.

Fitch Ratings said in a statement that you believe that during the earthquake the losses to the largest insured losses in the history of are, from the first, and reinsurance industry without widespread solvency problems or excessive financial burden included.

Cost of capital
But some estimates of the costs of the reconstruction shoot far higher than this consensus forecasts economists are taken into account the potential of the country's devastated capital stock over a longer period must be replaced.

Vanessa Rossi, senior research fellow at the London think tank Chatham House, estimates that in the earthquake, this corresponds to 10% of the share capital of Japan's lost about 20 percent of the country's GDP, or $1 trillion.

Story: Japan accident dims odds of the U.S. nuclear revival

"The major cost is share capital reconstruction." This type of problem really caused damage to the capital. There are enormous damage to the infrastructure installations, power plants, housing, factories, ports, coastal landscape, "said Rossi."She could not possibly so comprehensively new create years in the period of 1-2. "I expect it to 4-5 years would work."

She said also Japan's rich private sector debt-ridden Government was probably by the sale of its foreign assets complement and under use secure reserves, which could weigh on the international markets.

Paul Newton, auto industry analyst at IHS global, of the damage to the car sector, said the reconstruction had to include to get much more than just the country's production, the economy back on its feet.

"The tragic loss of life and homes across the region means that even if fixed infrastructure and facilities can entire communities, that many of these plants having have uprooted have or still missing are," he said.

Copyright 2011 Thomson Reuters.

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