March 16th, 2011
My last journal entry was about how Japan is fortunate enough to not be involved with religious extremism as it would help it to recover from the latest natural disaster there. This week I have picked another article relating to Japanese crisis. However this time this is in the context of the effect on global economy.
The article titled “Nuclear Crisis rocks Japanese, global markets” appeared in The Washington Post on March 16th and is written by Neil Irwin and Arian Eunjung Cha. This report is about how the ‘worsening nuclear crisis in Japan… triggered a crash in…financial markets, major losses in markets around the globe and widening fears that last week’s devastating earthquake will take a major economic toll.’ The latter is especially worth of consideration as lately financial markets in Europe and U.S. have experienced crises and the situation is Japan is no better.
The value of yen has risen against the dollar and in my educated guess is that this appreciation in the yen is due to the expectation that insurers and Japanese corporations will need to move money overseas into the country for reconstruction purposes. At the same time, the drop in prices of oil may be of a good nature since the at least partial destruction of Japanese nuclear reactors means that Japan will be relying on mineral sources for energy production.
Finally, the most important aspect is that this crisis is likely to lower the business and consumer confidence in the U.S just like the European financial crisis last spring coincided with a slowdown in growth here.