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Mon 21 Mar 2011 07:27 PM

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Quake, tsunami could cost Japan economy up to $235bn

World Bank report says real GDP growth will be negatively affected through mid-2011

Quake, tsunami could cost Japan economy up to $235bn

Japan's earthquake and tsunami could cost its economy up to $235bn, or four percent of output, the World Bank said on Monday.

"If history is any guide, real GDP growth will be negatively affected through mid-2011," the Bank said in its latest East Asia and Pacific Economic Update report.

But growth should pick up in subsequent quarters "as reconstruction efforts, which could last five years, accelerate", AFP reported.

The lower end of the damage estimates, based on projections by the Japanese government and the private sector as of March 17, was equivalent to 2.5 percent of gross domestic product (GDP), or $122bn.

World Bank chief regional economist Vikram Nehru said: "Clearly given Japan's importance in East Asia, the tragic events unfolding will be felt in the region. But it's far too early to give an accurate assessment of the likely damages.

"At this stage, we expect the economic impact of this disaster on the East Asian region to be fairly short-lived. In the immediate future the biggest impact will be in terms of trade and finance. We expect growth in Japan will pick up as reconstruction efforts accelerate."

On trade, if the Kobe earthquake of 1995 is to serve as a historical guide, Japan’s trade slowed only for a few quarters; Japanese imports recovered fully within a year and exports rebounded to 85 percent of pre-quake levels.

"But this time around, disruption to production networks, especially in automotive and electronics industries, could continue to pose problems," added Nehru.

Japan's GDP grew 3.9 percent in 2010, when it was overtaken by China as the world's second-biggest economy.

The auto and electronics industries are already feeling the impact from the country's deadliest natural disaster since 1923, with production at major companies including Toyota and Sony disrupted.

In the electronics sector, prices of memory chips have shot up by more than 20 percent in some segments, the World Bank said.

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