Economic recovery coming along nicely for Japan
A rescue worker stands atop rubble during a body recovery mission on March 20, 2011 in Ofunato, Iwate, Japan.
Tess Vigeland: Today, the Japanese government reprimanded the Tokyo Electronic Power Company, TEPCO, for allowing two of its workers to be exposed to dangerous levels of radiation after the earthquake. Nuclear safety officials ordered an investigation and told the operator of the Fukushima Dai-ichi plant to find ways to reduce risks to employees.
It's been three months since the earthquake and resulting tsunami struck Japan, and the aftereffects are still rippling through the country's economy. Joining us to discuss Japan's recovery efforts is David Weinstein. He's associate director of research at the Center on Japanese Economy and Business, part of the Columbia Business School. David, thanks for joining us.
David Weinstein: Thank you for having me here.
Vigeland: So here we are, three months after the big earthquake. How is Japan's economy recovering?
Weinstein: Well Japan's economy is recovering quite nicely, and most probably by the second half of this year, we'll see some pretty strong growth numbers coming out of Japan.
Vigeland: There was a lot of talk right after this happened that Japan was basically going to be able to fund its own recovery. Has that happened?
Weinstein: Yeah. One has to remember that Japan is a relatively wealthy economy, and Japan responded quite aggressively to the earthquake and tsunami and nuclear crisis. It had a very rapid supplementary budget passed through the diet, that stimulated a lot of economic activity. The Bank of Japan stepped in to help out companies. And I think that these measures are working, and helping Japanese firms to get back on their feet.
Vigeland: Just before the quake, the Japanese prime minister was set to promote a trade agreement with the U.S., but of course that was put on the back burner. How are trade pacts, then, a factor in the recovery?
Weinstein: Well I think this is going to be one of the big long-term impacts. Prime Minister Kan was a very big advocate for the trade pact of the Pacific, which was a multi-lateral trade agreement among Pacific Rim countries. And once the earthquake hit, he obviously had to turn his attention to the domestic crisis and he couldn't push this agenda forward. Obviously that creates a potential problem for Japan if the United States ends up signing a variety of trade partnerships with Japan's competitors.
Vigeland: We've heard a lot about the effect on the supply chain worldwide, with so much manufacturing coming out of China. How has that turned out? Has it turned out to be as bad as folks thought it might be?
Weinstein: In the short run, it was quite bad indeed. Japanese car production fell by almost 50 percent as a result of this. And that largely reflects the fact that when you're doing assembly, if even a small component doesn't arrive, you can't sell the finished product. But what we're seeing is that Japanese plants have been coming back on line; about 90 percent of the affected plants are now functional again. So I think that while we'll see some really bad numbers -- and we have seen some bad numbers over the last month and this month -- probably by July, that'll have largely passed.
Vigeland: You know, it's remarkable listening to you talk about what things are like over there. I would never have imagined that three months out, it would be as recovered as it is.
Weinstein: One of the interesting things that one observes in looking at catastrophic events in developed countries is that very often, the human toll can be quite catastrophic, but economies are fairly robust, and usually come back after a couple of months.
Vigeland: But what you're talking about with Japan is entire communities, entire swaths of land wiped out.
Weinstein: Right, but while it was catastrophic in those regions, those regions tended to be fairly rural areas. And one is also seeing an influx of new people coming into those areas to help rebuild and start up new companies in the wake of those places that have been destroyed.
Vigeland: David Weinstein is associate director research at the Center on Japanese Economy and Business at the Columbia Business School. Thanks so much for joining us.
Weinstein: Thank you for having me.