On this 11th March, Japan was struck badly with tsunami and earthquake. This tragic incident left millions of people homeless, and thousands of people got killed. The biggest impact of this epic disaster was on the economy of Japan, which just rattled badly. Furthermore,, the impact was on the Japanese currency which was devalued rapidly as compared to other major currencies. This economic slump led to the major downfall of Japan’s GDP. If the country’s economy can be sunk, all the other departments of the country are badly affected, which was the case of Japan. In this article, I am going to highlight the impact of Yen on the economy of Japan.
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Estimation of Cost:
Whenever a disaster struck in any country, it’s really tough for the administration to estimate the total cost that is needed to recover. Rough estimates show that government needs between $200- $300 billion. After this estimate, it can be said that it was the ugliest disaster in the history of Japan.
Impact of Currency:
After the disaster was over, the Japanese currency saw some positive impacts. The value of yen was increasing as compare to U.S dollar. The main reason behind this upward movement was that repair expenses were too high. The value of yen continued to hike until it reached almost 76 yens per dollar.
There is also another reason that helped the yen to increase. According to some investors, they were expecting that government might liquidate some major proportions of their high-valued investments. This resulted in the stronger position of the Japanese currency.
Hunting the bargain:
Another reason behind the upward movement of the yen is that it might be used for purchasing some valuable equities. This is because those who are involved in the bargain hunting are watching their high value in the stock. The main stock index of Japan, Nikkei has received a major slump of more than 2000 points after the earthquake. This might be due to the requirement of yen while buying Japanese stock.
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Impact on GDP:
As stated earlier, the cost of repairs was estimated too high yet it doesn’t include any cost that is needed to support the economy of Japan. The northern part of the Japan was the most affected part which according to estimate totals of 7% of country’s GDP. This high value is due to the damages of the industrial area that was present in northern Japan.
The earthquake and tsunami disturbed the production area of Japan, which resulted in the breakage of the supply chain between many industries throughout the country. The major automobile was forced to shut down their output plants. To offset this situation, the government supplied a large amount of currency to reconstruct the economy.
The bottom line:
The recent earthquake and tsunami left various impacts on Japan. On one hand, economy is badly disturbed but on the other hand, the value of Japanese currency has increased.