Earthquake to cost 3% of Japanese GDP: Barclays - MarketWatch

Earthquake to cost 3% of Japanese GDP: Barclays - MarketWatch

HONG KONG (MarketWatch) -- Damage from Friday's earthquake and tsunami in Japan are likely to tally 15 trillion yen ($184.2 billion), or about 3% of the country's gross domestic product, according to an estimate by Barclays Capital. The bank's Tokyo-based economists said regions affected by the quake account for 6% to 7% of the Japanese economy, making the current disaster similar in scope to the 1995 Great Hanshin-Awaji earthquake centered in Kobe. Friday's temblor affected a region with an industrial infrastructure "surprisingly similar" to Hyogo prefecture, the area most affected in the 1995 disaster. Manufacturing makes up about a quarter of both regions, while services account for about one-fifth, and wholesale and retail about one-tenth, Barclays said.

FT Alphaville » Goldman sees no earthquake impact on Japan’s GDP

A2: We estimate the damages will be around ¥16 trillion, surpassing the ¥10 trillion total from the Hanshin earthquake.
This total damage estimate refers to damage to the physical stock—buildings, production facilities, and the like. For the impact on GDP, a flow concept that reflects economic activity over a given period of time, see question 4.
阪神大地震發生於1995年1月17日
¥1 trillion in reconstruction outlays were included in an FY1994 supplementary budget (formed end-February 1995 by the central government), with ¥800 bn in special government bonds issued to finance this.

No direct impact will be seen in GDP data.
Damages from the earthquake do not have a direct impact on GDP, which is a flow concept that measures added value. Instead, they will impact capital, through damage to existing facilities, in a stock concept. The GDP impact is indirect rather than direct, including the impact on capex and personal consumption from reconstruction demand. For more details, see page 4 “Box: Stocks and Flow – Earthquake impact on GDP” in the March 15 Japan Economics Analyst.
As a result, real GDP movement differs from recurring profit movement. As seen from the Hanshin earthquake, the decline in fixed-asset value due to the earthquake leads to real GDP growth, but recurring profits are dragged down by losses and do not grow as much as real GDP (see Exhibit 1).