Japan’s earthquake and its economic impact

The economic aftershocks of the earthquake and tsunami which struck Japan on Friday are only slightly less difficult to fathom than the scale of the human tragedy and physical devastation. This massive event was bigger than the Great Hanshin quake that devastated Kobe in 1995. Its economic impact may be less severe. The 1995 earthquake ranked among the most economically costly of modern earthquake disasters. With a magnitude of 6.9 it struck directly under a large modern urban area, killing more than 6,500 people, knocking out communications, highways, railways, water and other essential infrastructure, destroying over 150,000 buildings and damaging 180,000 more, with over 600,000 made homeless. In terms of loss of life there have been many worse disasters in China, Russia and South Asia. But the damage to physical capital stock in Kobe was US$114 billion, 2.3 per cent of Japan's GDP and around 0.8 per cent of Japan's physical capital stock at the time - fully three times the recorded cost of any disaster in history.