impact of japan’s calamity to M’sian economy

Posted: 20/03/2011 in In my words - zenith

Malaysian analysts had mixed views as to whether damage from the devastating earthquake in Sendai and the nuclear reactor blasts in Fukushima will drag the world economy and hit export-oriented Malaysia, which is already bracing for slower growth this year and next.

Nevertheless, they all expressed concern that the situation might worsen. It may also have been bad timing that just days ago, before the calamities, central Bank Negara Governor Zeti Akhtar Aziz had raised lenders’ statutory reserve requirement to 2 per cent from 1 per cent in a bid to mop up excess money in the market.

CIMB chief economist Lee Heng Guie told Malaysia Chronicle that for now it was too early to quantify the full effect of the Japan crisis on the local economy. The government has forecast 2011 GDP gowth at 5 to 6 percent this year.

“We are coming up with reports and gathering input to assess the situation,” Lee said.

Meanwhile, Japan’s Nikkei Stock Average plunged 6.0 per cent in early morning trade, extending Monday’s 6.2 per cent loss, while Australia’s S&P/ASX 200 was down 0.3 per cent, South Korea’s Kospi Composite was up 0.6 per cent and New Zealand’s NZX-50 was flat.

Dow Jones Industrial Average futures were down 58 points in screen trade.

The Malaysian benchmark index KLC was down 0.6 per cent to 1,486.42, breaking below the pyschological 1,500 mark.

Worrisome for all

So far, the Yen has remained strong but further down the road it might weaken under the weight of new debt Japan must undertake to repair the damage from the twin calamities that struck last Friday. Some global banks have estimated the full costs to be in the region of US$171 billion.

According to Lee, the Kobe earthquake that struck the southern part of Hyōgo Prefecture on January 1995, has made the Japanese more resilient and better armed to handle the latest catastrophe.

“After the Kobe disaster, the Japanese have developed better business continuity plans that enable them to carry on,” said Lee.

Bank Islam Malaysia’s chief economist, Azrul Azwar Ahmad Tajudin, fears Malaysia’s the flow of imports and exports to Japan will be disrupted.According to him, Japan was one of Malaysia’s major trading partners, behind US, Singapore and Europe.

“In view of the extent of damage in Japan, the economic situation in Malaysia is quite worrying, and growth performance will be affected,” Azwal told Malaysia Chronicle.

He said investors the world over would only be able to breathe easier once the degree of damage in Japan had been assessed and the rebuilding effort detailed and announced. Only with the return of investor confidence could the world economy continue to rebound, he added.

Last week, a 9.0 magnitude earthquake, Japan’s largest recorded so far, caused a colossal tsunami to hit the east coast. It has been estimated that at least 10,000 people have been killed and many more still.

Early this morning, a third blast occured at the Fukushima Daiichi nuclear plant where combustible hydrogen had been building up due to the venting of gas from inside the reactor.

The International Atomic Energy Agency has said it does not expect a new ‘Chernobyl-type’ nuclear-meltdown disaster at Fukushima

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