The addition of water damage and a serious threat of radiation leaks raises the level of the challenge, but Japan has a culture and mentality that facilitates rebounds and recovery.
San Diego, CA (Vocus/PRWEB) March 16, 2011
Investors watching only the mainstream media's coverage of Japan's post-earthquake and post-tsunami activity are not getting an accurate picture of the country's remaining industrial capacity. James Brumley, chief analyst of the Rhino Report, has offered perspective and additional data to subscribers that suggest hysterical reactions and worry are largely unmerited.
While the images and films of last week's tsunami in Japan are horrifying, only a small portion of country was affected by the rushing water. Moreover, though the flooding did impact an industrial center as well as the Fukushima nuclear power plant, this northeast region of the country only contributes about 4% of the nation's annual GDP. The majority of Japan's manufacturing capacity is still intact, with much of it not being affected at all by the earthquake or the tsunami.
Brumley writes "Toyota and Honda will be reopening several plants over the next few days, but Texas Instruments' technology manufacturing facility there won't be fully restored until July. 'Weeks to months' seems to be the typical description of the likely delay in resuming operations for those adversely impacted, but most facilities have already restarted operations."
Japan has also proven to be resilient when it comes to surviving and reversing natural disasters. The January, 1995 earthquake centered near Kobe - another of Japan's major industrial centers - tore that city and its factories apart then. But, after industrial activity fell 2.6% that month, it rose 2.2% in February, and was up 1.0% in March, just two months later. The GDP growth rate for the first quarter of 1995 in Japan still came in at 3.4%. In fact, Japan's economy grew by 1.9% in 1995, and then 2.6% the next year.
"Granted, the addition of water damage and a serious threat of radiation leaks raises the level of the challenge, but Japan has a culture and mentality that facilitates rebounds and recovery", Brunley comments.
As for the concerns that radiation could leak out of a damaged reactor, it's not an illegitimate worry. Still, the media has focused on the worst-case scenario, without looking as closely at the most-likely scenario. Odds are that the leak will be contained, one way or another, before it reaches dangerous levels.
Brumley adds, "On a side note, the failure of the safety measures at the Fukushima nuclear power plant have prompted discussions that this accident could spell the end of nuclear power itself, as the dangers are highlighted. An ideal world would be a non-nuclear world to be sure, but with seventeen such facilities in Japan alone, and more than 400 nuclear power plants worldwide supplying 15% of our energy, nuclear isn't going away anytime soon. All sixteen of Japan's other nuclear plants are still safe. The problem with the Fukushima plant isn't nuclear power itself, but an antiquated plant built in the 1970's near the coastline. It's very much an anomaly relative to today's nuclear power standards."
The Rhino Report's chief analyst does expect the broad market to sink further, but the disaster in Japan is only the catalyst that put the selling into motion. The market was overbought already, and ripe for such a dip.
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