The Japanese earthquake has caused terrible human suffering and our thoughts are with the Japanese people and all those affected by this incredible nightmare.
There is no way to underscore the depth of the tragedy we see playing out before us as the potential of a nuclear nightmare of unprecedented proportionsunfolds before our eyes. And while it pales in comparison to the human toll, the Japanese economy is also surely facing a period of great challenge.
Japan is the third-largest economy in the world and it's economy grew at a 3.9% rate in 2010, its best performance in two decades. Still, the impact of last week’s earthquake, tsunami, and the unfolding nuclear crisis cannot be understated. Barclays Capital estimates that the damage from the earthquake and tsunami is likely to cost some 15 trillion yen (US$184 billion), or about 3 percent of the country's GDP.
We think that this figure is probably on the low side. Additionally, the damaged Fukushima Daiichi Nuclear Power Plant along the coast of Japan will likely result in a tremendous headwind for Japan GDP.