March 28, 2011
Topic: Economic impact of the disaster in Japan
“Expect a positive impact on GDP due to higher fixed investment, increased fiscal stimulus, and quantitative easing by the Bank of Japan.”
Niso Abuaf, finance professor at Pace University’s Lubin School of Business in New York City, is a former managing director and head of financial strategy for Credit Suisse and Salomon Smith Barney and a former vice president and economist for Chase Manhattan Bank. Abuaf has had past dealings with Japan throughout his career and is available to comment on the economic impact of the recent disaster.
“According to the Cabinet Office and market analysts, the economic effects of the March 11 earthquake in Japan will be direct losses of Y16T-Y25T (vs. Y10T-13T for Kobe); damage to private corporate capital stock of Y9T-Y13T; and fiscal deficit of Y7T-Y8T (vs. Y3.8T for Kobe). There is also the possibility of a governmental funding shortfall of Y12T, due to sudden economic slowdown, lower tax revenues, and special tax breaks.
“There will be a positive impact on GDP due to higher fixed investment, increased fiscal stimulus [bigger than Kobe (post-Kobe fiscal stimulus was $39B)], and quantitative easing by the Bank of Japan. The drop in output in damaged areas will be picked up by the slack in production capacity in non-affected areas.
“There will be a negative impact on industrial production due to supply chain problems, damage to manufacturing facilities, electricity shortages, and a loss of confidence.
“Kobe’s damage was approximately half of the recent quake, yet industrial production and consumer confidence fell sharply that month; GDP rose 3.2% per annum, quarter on quarter in 1Q1995, following a 0.7% per annum contraction in 4Q1994; and the Yen appreciated by approximately 20% in the few months following Kobe.”
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BACKGROUND: Abuaf teaches corporate finance, international finance, micro- and macroeconomics, and securities valuation at Pace’s Lubin School of Business. His research interests include international finance, valuation of financial instruments, and enterprise risk management. He is a consultant at the securities firm Ramirez and Co. (2009-Present); and served as managing director and head of financial strategy for Credit Suisse (2000-2008), managing director and head of international financial strategy for Salomon Smith Barney (1987-2000) and vice president and economist for Chase Manhattan Bank (1984-1987). He was a lecturer of economics and finance at the University of Chicago Graduate School of Business (1981-1984).
Media contact: Bill Caldwell, Pace University, 212-346-1597, firstname.lastname@example.org