Scramble to Avert Meltdowns; Death Toll Estimate Tops 10,000; Industries Shut Down; Japan Goes Deeper in Debt; Keynesian Stimulus Nonsense

Ever since the earthquake and tsunami hit Japan, news has been flowing from the country, nearly all of it bad.

Partial Meltdowns Likely Occurred

The New York Times reports Japanese Scramble to Avert Meltdowns as Nuclear Crisis Deepens After Quake

Japanese officials struggled on Sunday to contain a widening nuclear crisis in the aftermath of a devastating earthquake and tsunami, saying they presumed that partial meltdowns had occurred at two crippled reactors and that they were facing serious cooling problems at three more.

The emergency appeared to be the worst involving a nuclear plant since the Chernobyl disaster 25 years ago. The developments at two separate nuclear plants prompted the evacuation of more than 200,000 people. Japanese officials said they had also ordered up the largest mobilization of their Self-Defense Forces since World War II to assist in the relief effort.

On Saturday, Japanese officials took the extraordinary step of flooding the crippled No. 1 reactor at Fukushima Daiichi Nuclear Power Station, 170 miles north of Tokyo, with seawater in a last-ditch effort to avoid a nuclear meltdown.

Then on Sunday, cooling failed at a second reactor — No. 3 — and core melting was presumed at both, said the top government spokesman, Chief Cabinet Secretary Yukio Edano. Cooling had failed at three reactors at a nuclear complex nearby, Fukushima Daini, although he said conditions there were considered less dire for now.

A meltdown occurs when there is insufficient cooling of the reactor core, and it is the most dangerous kind of a nuclear power accident because of the risk of radiation releases. The radiation levels reported so far by the Japanese authorities are far above normal but still too small to pose a hazard to human health if the exposure continued for a brief period. The fear was that more core damage would bring bigger releases.

Death Toll Likely Exceeds 10,000

Yahoo!Finance reports Japan quake-tsunami death toll likely over 10,000

The death toll in Japan's earthquake and tsunami will likely exceed 10,000 in one state alone, an official said Sunday, as millions of survivors were left without drinking water, electricity and proper food along the pulverized northeastern coast.

Although the government doubled the number of soldiers deployed in the aid effort to 100,000, it seemed overwhelmed by what's turning out to be a triple disaster. Friday's quake and tsunami damaged two nuclear reactors at a power plant on the coast, and at least one of them appeared to be going through a partial meltdown, raising fears of a radiation leak.

The police chief of Miyagi prefecture, or state, told a gathering of disaster relief officials that his estimate for deaths was more than 10,000, police spokesman Go Sugawara told The Associated Press. Miyagi has a population of 2.3 million and is one of the three prefectures hardest hit in Friday's disaster.

Teams searched for the missing along hundreds of miles (kilometers) of Japanese coastline, and hundreds of thousands of hungry survivors huddled in darkened emergency centers that were cut off from rescuers and aid. At least 1.4 million households had gone without water since the quake struck and some 2.5 million households were without electricity.

Japanese Trade Minister Banri Kaeda said the region was likely to face further blackouts and that power would be rationed to ensure supplies go to essential needs.

Large areas of the countryside remained surrounded by water and unreachable. Fuel stations were closed and people were running out of gasoline for their vehicles.

Auto Industry and Sony Shuts Down

The Telegraph reports Japan shuts down as economic fears grow

The three largest motor manufacturers – Toyota, Honda and Nissan – said they would stop production at almost all of their domestic assembly plants. The safety of the workforce and deaths were cited as reasons behind the decision. The electronics giant Sony also said it would be shutting down production.



Economists warned that the closures staged by the motor and electronics companies could be the tip of the iceberg, with other parts of industry likely to feel knock-on effects in the coming days.

“Temporary closures of factories and oil refineries and the shutting down of power stations are likely to affect output throughout the country,” said Wolfgang Leim of Commerzbank. “Economic output may therefore shrink again slightly in the first quarter.”

Japan Set to Go Deeper in Debt

Japan's national debt is 200% of GDP. Of the G20 nations, that is the highest percentage in the world in terms of Debt-to-GDP. Japan cannot afford more debt, but more debt is coming regardless.

Bloomberg reports Japan Plans Spending Package as Quake Slams World's Most Indebted Economy

Japan aims to compile a package to fund the rebuilding effort after its strongest earthquake on record, a step that may worsen the challenge of reining in the world’s biggest public debt.

Policy makers will need to compile a spending package “over the medium to long-term” to cope with the aftermath of the 8.9-magnitude earthquake and the tsunami it triggered, Chief Cabinet Secretary Yukio Edano told NHK Television.

“A supplementary budget is like the last thing that people watching the JGB market want to hear,” said Ogawa, adjunct professor at Columbia University’s School of International and Public Affairs in New York, and a former Japanese banking analyst who lived in the nation for 15 years. The prospect of rebuilding “signals another leg down in Japan’s fiscal health. So I’m concerned that in the short to medium run, there’s going to have to be more borrowing,” she said.

“We will probably need a supplementary budget to work on this,” Sadakazu Tanigaki, who heads the Liberal Democratic Party, told reporters March 11 after Kan convened a meeting of party leaders. “We will cooperate with all our might.”

Japan’s borrowing burden is a legacy of economic stagnation following the bursting of its stock and property bubble in 1990. Financial-industry bailouts and repeated attempts to revive growth through fiscal stimulus contributed. The debt is set to reach 210 percent of GDP in 2012, the highest among countries tracked by the Organization for Economic Cooperation and Development, compared with an estimated 101 percent for the U.S.

One potential positive from the earthquake is the chance to revive a less-populated area of the nation. Provincial regions outside of Tokyo have borne the brunt of the decline in Japan’s population since 2006. The prefectures of Akita and Aomori, within Tohoku, have had the biggest decline in residents in the five years through 2010. Miyagi, where Sendai is located, accounts for 1.7 percent of the nation’s people, according to economist Richard Jerram at Macquarie Securities Ltd.

“This is a Keynesian stimulus program that nobody can argue with: just rebuilding the city of Sendai,” said Marcus Noland, deputy director of the Peterson Institute for International Economics in Washington, co-author of the 2001 book “No More Bashing: Building a New Japan-United States Economic Relationship.” “Rebuilding Sendai could actually be an opportunity to try to create a growth pole in northern Japan.”

Keynesian Nonsense

I had been wondering how long it would take before some Keynesian clown would make a case that there is some economic benefit to be derived from the earthquake.

The idea is complete nonsense of course. There is nothing economically stimulating about tsunamis or earthquakes, or the destruction of any useful property.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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