The Japanese are different. It is as impossible not to be moved by the images of suffering and destruction that come from Japan as it is not surprised by the stoicism of the victims. While in other countries, scenes that follow a disaster often panic, disorder and looting, in Japan we see long lines of people waiting in quiet care or buying food. And faces that reflect an unimaginable pain that is not expressed with fanfare. The Japanese deserve the admiration and solidarity of the world.
Financial markets are also different. But otherwise. They are betting that the Japanese economy will recover sooner than the images of devastation might suggest. Also betting that the financial impact on other countries will be lower and that long-term economic effects to be significant.
Less than a week after the earthquake and tsunami, with nuclear plants still on fire and the stock market in Japan fall, the international investment fund specializing in buying shares in Japanese companies receiving record volumes of money: in the week investors deposited 956 million dollars, when the week before the earthquake was the amount of 180 million.
The same thing happened with the currency. Days after the tragedy, the yen reached its highest level since World War II. A strong currency so has very harmful to the country's exports and international causes multiple mismatches. So the central banks of the seven richest countries very effectively intervened in currency markets, managed to stabilize the Japanese currency. This was also a novelty: the coordinated intervention by central banks had not happened for over a decade.
The stronger yen is that the markets anticipated a massive repatriation of Japanese capital deposited in other countries and currencies. As this money must be returned to finance the reconstruction will increase the demand for yen. Assuming that this would raise the value of the currency, speculators rushed to buy yen. But in this case some lost: the central bank intervention prevented the Yen continue to rise.
Those probably are not going to lose are those who have bet on the rapid recovery of Japan. While this accident was devastating, the highest estimate of its cost is 300,000 million dollars, and most analysts stands at 200,000 million more dollars. This figure represents only 4% of Japanese economic activity and 1% of the country's wealth. Columnist Martin Wolf points out that in Japan, the global financial crisis had an impact equivalent to 10% of its economy. While the images we saw in Japan after the financial crisis did not have the drama of which we now see, the reality is that the crash of 2009 affected a much larger number of Japanese.
The other calculation that financial markets are making is that Japan's recovery will be as fast as that recorded in other disasters. Garry Evans of HSBC, studied the financial impact of the earthquakes in Kobe (Japan) in 1995, Taiwan in 1999, Chile in 2010 and 2001 terrorist attacks. Found that after an initial drop, the respective stock markets recovered to its level precatástrofe between 23 and 78 days and 100 days later were above that level. Moreover, the economies affected by these disasters are growing thanks to the encouragement of investment for reconstruction. In 2010, Chile suffered a devastating earthquake rose to 5%.
Obviously, the tragedy of Japan has other negative effects, because there are critical links to many of the supply chains of depending on the industry worldwide, and now these nodules are unemployed. Insurers suffer and the nuclear industry's future is in question. The latter also are betting investors: the price of uranium has fallen by 30%.
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