Another explosion rocks nuclear plant as economic toll of Japanese disaster comes to light

Fears of a looming nuclear disaster in Japan are growing after news of yet another explosion occurring this morning at the Fukushima nuclear power plant.

However, Government officials have said the explosion was due to a build-up of hydrogen and that reactors are still intact, despite fears they are overheating.

The economic toll of the disaster is now being put in the spotlight, with sharemarkets still tumbling and credit agencies releasing estimates of the potential damage.

The benchmark Nikkei index has fallen by 5% in morning trade after tumbling 6.2% yesterday. Wall Street and European markets also fell overnight on concerns about the impact from the Japanese disaster.

Ratings agency Moody’s has said while the disaster will not prompt an immediate financial crisis, the reaction from the bond market will be crucial to the recovery.

Modelling firm Eqecat predicts the disaster will cost over $US100 billion in total to repair, combining the costs of floods and fires.

Tim Harcourt, chief economist at AusTrade, says that given the huge scale of the human tragedy the Australian Government is focusing on the humanitarian effort – there are over 170 Australians still unaccounted for in the affected regions. But he also warns that it is difficult to assess the economic and trade impacts of the disaster.

Japan is Australia’s second largest trading partner, worth nearly $59 billion, with over 3,300 businesses exporting there.

One of the worst affected regions, Sendai, is a major rice growing region and is also the location of several chip and auto manufacturers, prompting fears that gadget makers and the consumer electronic industries will be hit by the disaster.

JB Hi-Fi chief executive Terry Smart told the Australian Financial Review the company is concerned about such a situation occurring.

“We have not been updated as yet and plan to get an update over the next few days about any delays. We do have some concerns that it may lead to delays with Sony and Panasonic,” he said.

However, Goldman Sachs has reported there could be “extreme damage” to the electronics industry, with Sony already suspending production. Toshiba has also said it does not when it can re-open its northern factory.

Goldman has also said the risk has risen that US stocks could fall by 10% in April, 

Harcourt says Australians, as major food and energy exporters to Japan, will play an important role in the country’s reconstruction.

“After the Kobe earthquake, Japan’s flagging GDP received a welcome stimulus in the reconstruction phase. Japan will be providing important domestic stimulus in the reconstruction and recovery phase which Australia will contribute to as a leading trade and investment partner of Japan.”

Nomura economists Takahide Kiuchi and Ryota Takemoto have written in a new report that rolling blackouts in the affected regions may cut Japanese GDP by 0.29%.

“Although we think these estimates could end up being on the high side, we would caution that power cuts are bound to have a negative impact on the Japanese economy,” the pair said.

Nomura also predicted that annual profits for auto manufacutrers Toyota, Honda and Nissan could be hit by between 3-8% this year. Toyota and Nissan have already halted production.

They added that while GDP growth will be hit in the current and next quarter, the third quarter will see the country return to positive growth.

“We now expect the Japanese economy to take longer than we expected to exit its current soft patch owing to the earthquake and the economy,” they said.

Meanwhile, workers at the Fukushima nuclear power plant are continuing to fight to contain the damage to the reactor, which is in danger of overheating. More than 100,000 people have been evacuated from the surrounding areas, and over 20 workers have been treated for radiation poisoning.

News of a third explosion was reported this morning at the plant, although officials have said radiation has not increased as a result. It is understood the explosion was due to a build-up of hydrogen, and the reactor core is still intact.

The nuclear disaster has had major ramifications worldwide – Germany has now suspended its plans to extend operation of nuclear reactors.

Over 500,000 people are now thought to be homeless as a result of the disaster, and 10,000 killed, but rescue workers warn they have not been able to access some of the more isolated areas.