Twin crisis rips off Japan's trade prospects

The devastating quake has brought a deadly flash of tsunami, sweeping across Japan, and a resulting decline in the country's trade activities. While the nuclear reactors are seeing a meltdown, the country's trade gets frozen.

A worst nightmare has become a reality. Japan is facing the worst crisis in the past 65 years. The twin disasters that struck Japan have damaged its trade activities along with the country and thousands of lives as well. Apart from physical hurt, it would also cause an economic depression in the country. Ports and airports are closed, and damaged roads also impact logistics and transport. This is likely to deteriorate Japan's trade activities and other financial markets across the globe.

The country's economic loss is estimated to be around $170 billion. Japan is a major importer of Chinese silk. The devastating earthquake, followed by the tsunami, is bound to decrease the silk imports from China. The chemical industry of Japan has received a severe blow, which would recover without any doubt, but will be time-consuming.

Petrochemical exports from Japan:

A number of facilities in Japan have shut down their operation following the massive twin crises. The Asian market is likely to be most affected by the loss of exports from Japan, as the latter is the key supplier of advanced components to Asian countries. Japan is a major supplier of ethylene, paraxylene, and styrene monomer to South Korea and China. China depends on Japan for 13% of its imports. The market for petrochemicals is expected to tighten particularly for propylene and acrylonitrile. Some specialty chemicals would get an indirect impact if Japan's nuclear outages influence natural gas prices outside the US. ICIS reports Huatai United Securities saying, "The earthquake in Japan will tighten the global petrochemical supply and push up prices as Japan is an important petrochemical producer in the world."

Bilateral trade with India:

The bilateral trade between Japan and India was $10.2 million during 2009-10. The current situation of Japan makes its recovery complicated and time-consuming. Apparel and carpet exports will see some decline, while imports will be a major hit as Japan is a major exporter for India. Apparel exports from India to Japan are predicted to see a loss of 50 crores in the next three months. The Financial Chronicle reports Ajay Dua, former industry secretary saying, "Japan needs to spend huge money on reconstruction. It has a public debt to the order of 180 percent of its GDP and hence, there will be a shift from consumer spending to rehabilitation over the next six-eight months."