Now the Fukushima nuclear disaster has the prospect to do real damage the Japanese economy and the country’s finances above and beyond what has already been estimated.
For Australia, the steadily growing problems in Japan (which is the second largest consumer of Australian exports) from the Fukushima nuclear disaster should be watched very closely.
It is becoming unpredictable, both in terms of the radioactivity problem and in a business and political sense.
The disaster could cripple Japanese business and consumer confidence for much longer than previously thought, plunge the economy back into recession and inflict another round of deflation, just as it is breaking free of years of weak growth, low consumption and falling prices.
The country’s export machine and high business investment were two major drivers of this economy, but the both could be brought to a halt by the Fukushima disaster, even as the rebuilding of the tsunami and quake damaged northeast continues.
Yesterday the level of radioactive iodine found in the sea near the Fukushima plant hit its highest level, over 4,000 times above the safe level, according to Tokyo Electric Power Co.
And the International Atomic Energy Agency says radiation levels twice as high as its criterion for evacuation were detected in a village 40 kilometers from the troubled Fukushima Daiichi nuclear plant.
This is outside the 20 kilometer exclusion zone and the 20-to-30 kilometer alert zone where the Japanese government advises voluntary evacuation.
Overnight Thursdaywe had the first real evidence of the damage done to the Japanese economy by the events of March 11.
The seasonally adjusted Markit/JMMA Japan manufacturing purchasing managers’ index fell to 46.4 in March from 52.9 in February, the sharpest fall since the data began in 2001, according to a Markit statement.
New orders fell at the steepest rate in two years, while cost inflation rose at the fastest pace in two and a half years, according to the release.
In fact Japanese manufacturing activity hit a two-year low in March, as the quake, tsunami and now the Fukushima nuclear crisis saps confidence, demand and output.
The PMI index gives a snapshot of overall activity in manufacturing, including output, order flows and pricing, with a figure above 50 indicating growth in activity and a figure below that level indicating a contraction.
Other surveys are out for Australia today, China, the US and much of Europe and Asia as well.
The survey is probably understating the damage done by the disasters with Markit pointing out that it didn’t get the same level of replies from the affected regions, including the Kanto area around Tokyo, that it does for normal monthly surveys.
In fact it only received replies from 60% of respondents in the Kanto area, which is Japan’s manufacturing heartland.
Replies came from just 5% of respondents in the Tohoku area where the quake and tsunami hit hardest of all.
American officials reported yesterday that minute traces of radiation had been found in milk in California and Washington state on the West Coast. As a result checks of water, milk and other foodstuffs are being stepped up.
And Bloomberg reported: “As many as 99 products, including milk and vegetables such as spinach, were found contaminated in Tokyo and five regions to its north and east as of March 26, according to a statement on the Japanese health ministry’s website".
US beef prices have hit new highs this week on growing fears that parts of the Japanese beef herd could be contaminated by radiation.
Even if it doesn’t happen, the fear is there and will send the Japanese consumer looking for clean food (from countries like Australia and New Zealand).
Now reports from Tokyo say the company at the centre of the crisis, Tokyo Electric Power Co, has asked the government for financial support to help meet the cost of compensation and the clean up.
If it does this, you can be sure other companies damaged by the triple disasters will be in line for a hand out, even a couple of insurers whose shares have been sold off in fear of huge damage claims or costs from paying for the damage.
Tepco Chairman Tsunehisa Katsumata was quoted by the Nikkei.com website "Compensation to people and businesses that have been affected by the nuclear accident could threaten Tepco’s business.
"Admitting that the company was facing an extremely tough situation, Katsumata said Tepco "will make efforts to prevent fund shortfalls by consulting with the government", Nikkei said.
That’s optimistic, believing two can be saved. But the decommissioning will cost money and the government will have to pay, one way or another.
"To be honest, it is extremely difficult to accurately grasp the conditions of reactors, containment vessels and fuel rods in spent-fuel pools," Katsumata said in a news conference Wednesday.
"Four of the six reactors at the plant have been experiencing problems after the tsunami caused by a massive earthquake wreaked havoc on the reactors’ cooling systems March 11.
"Stressing that bringing down temperatures inside the reactors is the top priority, the chairman listed three main challenges: removing sa
