logo

Japan disaster likely to impact California economy

image
Author: Bob Morris
Created: 14 March, 2011
Updated: 13 October, 2022
3 min read

As Japan suffers from a horrendous death toll and substantial damage to several of its nuclear reactors, trade with California will unquestionably be impacted due to the catastrophic earthquake and tsunami.

Much of the trade both ways is in technology and electronics. If, say, major chip fabrication plants in Japan are down or destroyed, this will have a severe impact on California (and the world) especially given our era of just-in-time shipping. In the early 1990's, a chip fab fire in Asia caused RAM prices to soar. It seems probable that a disruption like that could happen in the wake of the Japanese tragedy.

This type of disruption also applies to Japanese automakers. Toyota and Honda have already shut down several assembly plants, hopefully just temporarily. Some of the plants are in the earthquake area. If they are still operational, will they have power, water, no nuclear radiation, and a workforce that still has homes? 

California accounts for 20% of all US exports to Japan. It exports food as well as tech. Given the port and rail disruption in Japan now, many of our exports may not be able to reach their destination. Or, if they can, it will take much longer as still-functioning ports, rail, and roads become hugely overburdened with extra traffic. The reverse applies too. Japanese products intended for California may be delayed, if they arrive at all.

California exported a record $11.75 billion in January, the highest amount ever. $1 billion of that was to Japan. (The vast bulk of this, sad to say, was goods made in other states and shipped out of California.) Clearly, that $1 billion is in peril, at least temporarily. Not many companies in Japan will want to be making any definitive plans until the full scale of the disaster is known and recovery is underway. Trade between Japan and California will probably plummet in the short-term.

Make no mistake, this was a black swan event, something no one could have predicted and which changes everything. Entire towns no longer exist. Massive parts of the infrastructure in the tsunami area are gone. Areas could become radioactive. Roads, rail lines, airports, power plants and the grid itself have to be rebuilt. Japan will undoubtedly be preoccupied with this for years to come. It's said that in great calamity there can also be great opportunity, but it's difficult to see that here. The devastation is too severe.

There will certainly be huge amounts of construction in the tsunami area soon. Maybe equipment built in California or shipped through it will be used. But Japan has companies that build similar heavy machinery and they can also import it from the much closer Korea or China. Also, most of Japan's non-nuclear power is from natural gas. Those plants will now ramp up to full capacity and the price of natural gas will almost surely rise. 

Given the scope of the destruction in Japan, it seems almost pointless (or heartless) to talk about trade. Yes, California will suffer as a result of the Japan quake. I was in Los Angeles during the Northridge quake, which was a 6.7. That will be an aftershock for Japan. And L.A. had no tsunami.  Maybe the best thing we can do is help Japan however we can, and then the trade will probably take care of itself.

IVP Existence Banner

Latest articles

votes
Wyoming Purges Nearly 30% of Its Voters from Registration Rolls
It is not uncommon for a state to clean out its voter rolls every couple of years -- especially to r...
27 March, 2024
-
1 min read
ballot box
The Next Big Win in Better Election Reform Could Come Where Voters Least Expect
Idaho isn't a state that gets much attention when people talk about politics in the US. However, this could change in 2024 if Idahoans for Open Primaries and their allies are successful with their proposed initiative....
21 March, 2024
-
3 min read
Courts
Why Do We Accept Partisanship in Judicial Elections?
The AP headline reads, "Ohio primary: Open seat on state supreme court could flip partisan control." This immediately should raise a red flag for voters, and not because of who may benefit but over a question too often ignored....
19 March, 2024
-
9 min read
Nick Troiano
Virtual Discussion: The Primary Solution with Unite America's Nick Troiano
In the latest virtual discussion from Open Primaries, the group's president, John Opdycke, sat down ...
19 March, 2024
-
1 min read
Sinema
Sinema's Exit Could Be Bad News for Democrats -- Here's Why
To many, the 2024 presidential primary has been like the movie Titanic - overly long and ending in a disaster we all saw coming from the start. After months of campaigning and five televised primary debates, Americans are now faced with a rematch between two candidates polling shows a majority of them didn’t want....
19 March, 2024
-
7 min read