Japan will rebound

Article Excerpt

Japan’s gross national product (GNP) will fall this year in the wake of the earthquake and tsunami. The disaster is relatively far from Tokyo, Japan’s economic centre. However, it has disrupted the country’s electricity grid, as well as transportation and communications networks. That will hurt most segments of the economy. Japan’s economy was forecast to grow by 1.4% this year, but it will likely contract in the second quarter due to the disaster. That will likely push down Japan’s growth rate to 1% or less for the year. The cost of the disaster could top $300 billion. But that’s more than manageable for Japan, which has the world’s third-biggest economy. The Japanese government will now spend heavily to rebuild the areas affected by the disaster. That will raise economic activity. What’s more, this spending will come at a time when most governments are cutting spending to lower deficits. That will likely push down the value of the Japanese yen. A lower yen would increase foreign …