By: Dr. Mike Campbell
From a psychological perspective, I suppose, it was inevitable that Japanese consumer confidence would suffer in the aftermath of the devastating earthquake and tsunami that struck the island nation in March.
The consumer index is used to measure how bullish or otherwise the Japanese consumer is feeling. A value of 50 on the index indicates neutrality, but the figure released for April is 33.1, down from 38.3 in March. No doubt, this reflects the realisation of the full enormity of the natural disaster. The more pessimistic the consumer feels, the less likely he or she is to spend their money, so the index can be used to gauge the effect on economic activity to a certain extent. Analysts suggest that Japanese citizens living in regions which were largely unaffected by the disaster may have reduced their spending on entertainment, dining and drinks as a mark of respect to their fellow citizens who suffered. This being the case, they argue that consumer confidence will strengthen in the coming weeks since consumers are not worried about job security. Also, according to Buddhist tradition, people should refrain from entertainment for the seven week period following the death of a friend or relative. This period came to an end on April 28th.
The disaster claimed more than 1500 lives and a further 9000 people are still missing. It had a catastrophic effect on the infrastructure with nearly 89000 homes and buildings damaged; 71 bridges and 3970 roads were also damaged. A further 5282 people were injured in the course of the disaster and its immediate aftermath. The Ministry of the Environment estimates that the disaster produced some 20 million tons of debris. The costs of reconstruction following the tragedy have been estimated at $309 billion by the government.