By: Dr. Mike Campbell
The economic aftershocks of the devastating earthquake and tsunami that struck north east Japan on the 11th of March continue to be felt. The nation is still suffering from the effects of disruption to the electricity supply which is hampering industrial output. Large parts of the infrastructure in the affected region have been badly damaged and continue to make life difficult. Displaced people are still in temporary structure and much of the devastated region remains to be cleared before any reconstruction efforts can get underway. In human terms, the death toll has surpassed 14000 and more than 12000 people are missing, presumed dead. Their bodies may lie in the tangled wreckage in the devastated coastal towns or have been swept out to sea as the tsunami retreated.
Reconstruction costs have been put at $309 billion, but the true costs will only be revealed with the passage of time. The Japanese government is faced with a debt mountain which is twice the size of the nation’s GDP, so borrowing further funds to pay for reconstruction and disaster relief is not an appealing prospect. The government of Prime minister Naoto Kan, has prepared a disaster relief of $48.9 billion. The proposal is that more than half of the money will be taken from pension funds and money set aside for increasing payments to families with children. The remainder will be found through spending cuts and tapping into emergency reserves. The government has said that it does not intend to issue further bonds to cover the costs of the disaster.
The budget will require the approval of parliament before it comes into force, but analysts expect it to be passed without much trouble in view of the sensitivity and urgency of the matter.