Friday, April 1, 2011

The fallout from earthquake and tsunami catastrophes in Japan will cost Australia about A$2 billion in lost export earnings in the near term due to lower Australian exports to Japan, according to estimates in a Treasury brief released Thursday. After China, Japan is Australia’s largest export market, making up 15 percent of its total exports.

“The tragic events in Japan—together with the impact of floods and Cyclone Yasi at home—will clearly mean revenues take a substantial hit in the near term”, Treasurer Wayne Swan said in the brief.

Short term exports of “non-rural bulk commodities” are predicted to be lower as Japanese port facilities, coal-fired power stations and steel-making plants were damaged. Businesses whose export products are designated for Japan must find other customers to replace Japanese clients, the brief said. The loss of Japanese markets has been a contributor to a 6 percent drop in the price of iron ore and an 8 percent drop in the price of coal. Japan imports account for 27 percent of Australia’s iron ore and coal exports.

Also on Thursday, Japan’s manufacturing production index experienced its sharpest fall in the decade since data has been collected, indicating a steep fall in output for most businesses in Japan in March. Recently, Japanese industry seemed to be rebounding from the global financial crisis.

In Asia, concern is mounting that the electricity shortages and other disruptions to Japan’s manufacturing sector will affect manufacturing in various areas of Asia, since the manufacturing of many goods are dependent on the integrated network of supply chains.