The calamitous earthquake and tsunami that ravaged northeastern Japan on Friday also wreaked havoc on a broad swath of manufacturing facilities in the Tohoku region, one of Japan's industrial hubs.
The calamitous earthquake and tsunami that ravaged northeastern Japan on Friday also wreaked havoc on a broad swath of manufacturing facilities in the Tohoku region, one of Japan's industrial hubs.
The disaster has damaged most of the major auto and electronics plants in the region, where many industries are concentrated due to its proximity to the Tokyo metropolitan area.
Roads and railways that are desperately needed to transport materials and products have been disrupted, while power outages continue across almost the entire region.
The shutdown of production of both key components and finished products has inevitably begun to affect factory operations in other parts of the nation. Exports have also been affected, further blighting the outlook for the Japanese economy.
Kaoru Yosano, state minister of economic and fiscal policy, told a news conference Sunday night that the economic damage from the Great East Japan Earthquake could be far more serious than that caused by the 1995 Great Hanshin Earthquake near Kobe, which incurred economic losses worth 10 trillion yen ($122 billion).
"We have to expect far larger damage this time than in the Hanshin (earthquake). All the cities, towns and villages along the Sanriku coast were devastated," Yosano said.
The combined economic output of the six prefectures in the Tohoku region--Iwate, Miyagi, Fukushima, Aomori, Akita and Yamagata--accounts for 6.4 percent of Japan's gross domestic product. The figure is larger than the 4.1 percent Hyogo Prefecture contributed when it was struck by the Great Hanshin Earthquake.
The Tohoku region is home to many production bases of manufacturers, mostly electronics makers and automakers. The region accounts for some 15 percent of the national shipments of information and communications equipment and 13 percent of electronic parts.
Nomura Securities Co.'s Financial and Economic Research Center has predicted that the damage and disruption in the region caused by the devastating quake will drag down Japan's real GDP by an annualized 0.25 to 0.5 percentage point in the January-March quarter and by 0.5 to 1.0 point in the April-June quarter.
But the research institute says the effects of public investment for rebuilding are likely to offset the expected declines, preventing the Japanese economy from sinking into contraction.
However, it is unclear how the blow to both corporate bottom lines and consumer confidence will affect the nation's economy.
It is also too early to predict how the effects of the devastation in Tohoku, which churns out a large volume of important components, will ripple through the nation's manufacturing sector.
After the Niigata Chuetsu Earthquake of 2007 halted production at an autoparts maker in the affected area, many major automakers were forced to stop production of vehicles at their plants in other areas.
Friday's quake has stopped operations at seven plants of Renesas Electronics Corp., a leading computer chip maker, in Aomori, Yamagata, Ibaraki and other prefectures, disrupting one-third of the company's domestic manufacturing facilities.
Toshiba Corp.'s manufacturing plant for semiconductor devices used in car engines and home electric appliances in Iwate Prefecture has been damaged.
Fujitsu Ltd. is shifting production of desktop computers and other products from its damaged factory in Date, Fukushima Prefecture, to a plant in Shimane Prefecture in western Japan.
Production of high-end digital SLR cameras, for which Japan is a market leader, has also been halted. Nikon Corp. has suspended operations at its plant in Natori, Miyagi Prefecture, which manufactures camera bodies. Canon Inc. has stopped production of camera lenses at a damaged factory in Utsunomiya, Tochigi Prefecture.
Since cameras are precision instruments, putting a damaged factory back into operation involves a time-consuming restoration process, including extensive adjustments and fine-tuning of the facilities and equipment.
Nippon Steel Corp.'s Kamaishi Works in Kamaishi, Iwate Prefecture, which manufactures wire rods for steel tire cords, was partially submerged by tsunami. The steelmaker, which claims a high share of the market for the components, is considering moving production to other facilities.
Takahide Kiuchi, chief economist at Nomura Securities, says the Tohoku earthquake has caused damage to a far wider range of areas than the 1995 quake and will, therefore, have a greater impact on the economy.