The great misfortune of Japan’s earthquake will shape the contours of economic activity in the country for some time to come. Japanese private sector estimates of the economic cost are centring on 3 per cent of GDP. Those estimates are split roughly half and half between the damage bill and the anticipated activity loss. This essay is not intended to critique the efforts of the forecasting community at this difficult time. Rather, it is to trace the thought processes involved in looking at such a disaster, and to make some observations about the future position of the Japanese economy at various horizons.
The great misfortune of Japan’s earthquake will shape the contours of economic activity in the country for some time to come. Japanese private sector estimates of the economic cost are centring on 3 per cent of GDP. Those estimates are split roughly half and half between the damage bill and the anticipated activity loss. This essay is not intended to critique the efforts of the forecasting community at this difficult time. Rather, it is to trace the thought processes involved in looking at such a disaster, and to make some observations about the future position of the Japanese economy at various horizons.