While the world has fallen out of love with the Japanese economy in recent years it remains an economic powerhouse and important to the global economy, Sean Corrigan, chief investment strategist at Diapason Commodities Management, said Monday.
“Japan contributes a huge amount of high value added goods and components to the world and China. Goods that look like they are produced by China can have huge input from Japanese firms,” Corrigan told CNBC.com.
“It is difficult to quantify the impact of this but it could have an impact in unforeseen ways,” he said.
"The other issue is how much money the Japanese authorities pump into the system," he added. "The clean up needs man-hours and work. Increasing the money the BoJ is pumping into the system could therefore have inflationary effects on certain products and financial assets which could have knock-on effects.”
“Japan is not short of paper money, it is short of construction materials,” he said.
The tragic events in Japan could also hit a number of assumptions the market is currently trading on, Corrigan said.
“Despite the trouble in the Middle East, global markets have been trading on the assumption that global growth will be strong," he said. "The Japanese tragedy could see big changes in the price of the yen and impact Japanese growth which could, in today’s highly-leveraged financial markets have knock-on effects that it is difficult to predict.”
“When Katrina hit, the market sold off on growth fears and then rebounded in a slightly different manor when it became clear that the clean up operation would be inflationary.”