Amid tsunami devastation, signs Japan economy poised to recover

Laura Rozen

In the wake of last Friday's earthquake and tsunami in Japan, the horror of the mounting death toll and devastation continues to sink in. And as the need for aid in the country escalates, the United States and other world governments have rushed assets to assist Japan's disaster recovery efforts and demonstrate international solidarity with the Japanese people.

Barack Obama said Monday that he was "heartbroken" over the scale of the destruction, and pledged to make available whatever assistance the United States can provide to help Japan recover from "multiple disasters."

Amid international efforts to assist Japan, several Asia experts and economists said Monday that Japan--the world's third-largest economy after the United States and China--is well placed to stimulate economic growth as it undertakes the rebuilding effort in the tsunami-stricken north of the country.

"You have to separate out the human horror of it, and the cost of doing what can be done to restore the viable economy in the Sendai area," said Samuels International foreign affairs analyst Chris Nelson.  "One of the horrible ironies of this kind of thing is, once you get over the shock and horror of the human loss, rebuilding is an economic stimulus. You have to get public money to rebuild the infrastructure and low cost loans for the factories to get up to speed."

The tragedy "reminds us what a big important place [Japan] is," Nelson continued.  There's been a tendency the last few years, Nelson continued, to "marginalize Japan, and Japan actually self-marginalized to some extent out of a sense of geopolitical weakness. But Japan is not Haiti."

The U.S. aircraft carrier the USS Ronald Reagan has conducted six maritime search and rescue missions and 20 helicopter missions to deliver supplies to towns near Sendai, the Defense Department said Monday. The Pentagon is also allowing the Japanese government to use the Misawa and Yokota airbases for aircraft carrying humanitarian personnel and supplies, it said.

Meanwhile, the U.S. Agency for International Development (USAID) said Monday that two U.S. urban search-and-rescue teams arrived in Japan Sunday, and USAID has provided some $640,000 to support USAID disaster recovery efforts in Japan, and an additional $100,000 to assist local relief efforts. Similarly, the British foreign development agency DFID said a British search-and-rescue team composed of some 60 British fire service search and rescue specialists, two rescue dogs and a medical support team had arrived Monday at a base in Ofunato, in northeast Japan to assist with recovery efforts.

"The human tragedy is awful, the destruction as these things go is awful," said New York University Stern School Asia economics expert Ed Lincoln. "But the starting point for all this is to remember that the destruction of physical assets is not something that is subtracted from GDP. . . . So the way construction will now proceed rapidly, we will see a noticeable increase in construction work and in the output of manufacturing firms that supply construction materials, such as steel firms."

The insurance modeling firm AIR Worldwide estimated Monday that the cost of property damage alone in Japan resulting from the earthquake and tsunami could amount to as much as $35 billion.

"Financing [the rebuilding] is not a problem," Lincoln said. "The bottom line is this: the Japanese government is able to issue new government bonds at 1.2 percent interest rates—which is extremely low--because Japan continues to be an economy that saves more than it invests."

Lincoln noted that the Japanese government has reacted gratefully to U.S. and international offers of assistance with recovery from this disaster—a striking contrast with Japan's initial rejection of U.S. offers of assistance after its 1995 Kobe earthquake.

"In that case, Japan had recently been through a period in which their economic growth had been very high and in which many Japanese had come to believe their economic system was better than that of the U.S.," Lincoln said.

"This time," Lincoln continued, "the Japanese government just said, 'thank you very much.' . . . In terms of U.S.-Japan relations, I am very pleased to see this, both that we have done the right thing by saying how can we help, just as other countries helped us in reaction to Hurricane Katrina," and in the Japanese reciprocating with gratitude for the help.

But the international disaster assistance is mostly "symbolic," Lincoln said, in terms of Japan's overall ability to recover economically from the disaster.

"These are by and large symbolic efforts at the margins," Lincoln said. "It helps to have the American military there, but the Japanese already have 100,000 soldiers deployed to do rescue work. Though in macro terms, it's mostly symbolic, I'm glad it's happening."

(Top photo, Japanese disaster response official comforts woman who found her home destroyed, March 14, 2011, Yoichi Hayachi, Associated Press. Right: In a March 13, 2011 Navy Visual News Service photo, a helicopter from the Japan Maritime Self-Defense Force lands aboard the aircraft carrier USS Ronald Reagan. The USS Ronald Reagan is off the coast of Japan rendering humanitarian assistance following Japan's earthquake and tsunami. AP Photo/Navy Visual News Service, Mass Communication Specialist Seaman Apprentice Michael Feddersen.)