Certainly the initial estimates of the cost of the disaster are that it will be at least as high as that of Kobe. With the nuclear emergencies in Fukushima complicating the situation further (rolling electricity blackouts are expected across the country in the coming weeks), there can be little surprise that Prime Minister Naoto Kan told a press conference: "This is the worst disaster Japan has faced since the Second World War."
All this comes in the aftermath of a fresh contraction in the economy in the fourth quarter of last year and at a point where Japan is already carrying a debt burden equivalent to roughly 200 percent of its GDP.
Indeed, it is worth remembering that it is only a matter of weeks ago since Standard & Poor's cut Japan's sovereign debt rating by one notch to AA- (the first cut since 2002), saying that the government lacked a "coherent strategy” for dealing with its growing debt burden.
Negative Fiscal Picture
Given that (entirely sensibly) the government will likely announce emergency spending to fund rescue and clean-up efforts and to resuscitate the economy, it seems reasonable to suppose that the current plans to balance the state's books will be pushed back even further out.
With this hugely negative fiscal picture being matched by the fresh quantitative easing measures announced by the BOJ overnight, the JPY is starting the week facing the prospect of looser fiscal and monetary settings. As such it is difficult to make an argument in favor of currency strength.
Indeed, given that any sustained recovery in Japan's economy is likely to be export-led, it seems reasonable to suppose that the Japanese government would be grateful for this one small piece of relief. It was therefore hardly surprising when Finance Minister Noda made his feelings clear on this matter Monday morning.