Japanese manufacturing at risk

Nikkei falls for a 2d day; infrastructure problems foreseen

An investor watched the stock price board at a private securities company yesterday in Shanghai. An investor watched the stock price board at a private securities company yesterday in Shanghai. (Associated Press)
By Neil Irwin and Howard Schneider
Washington Post / March 15, 2011

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The damage wrought by the earthquake in northern Japan has disrupted production of automobiles, computer chips, and a range of other goods and could force prolonged shutdowns in a key node of the global economy.

The Japanese stock market fell 6.2 percent yesterday, as investors began to price the full scope of the damage. That came despite a massive infusion of yen by the Bank of Japan to try to prop up the nation’s financial system.

The fall continued today, with the Nikkei plunging more than 12 percent in afternoon trading.

The area of Japan that suffered the most direct hit from the earthquake accounts for a relatively small portion of the industrial output of the world’s third-largest economy. However, damage to Japanese infrastructure — roads, rail lines, electricity — is more widespread.

That disruption has compromised the ability of Japanese manufacturers to obtain supplies and electricity to continue output and for their employees to get to work. It is too soon to know how much world supply chains for key goods will be affected.

Many auto plants across Japan have shut down, at least temporarily, wrote auto analyst Paul Newton of IHS Global Insight, who described the situation as fluid. Some of the shutdowns are due to rolling blackouts “to conserve power in light of the damage to several Japanese nuclear power plants; and some through disruption to the country’s transport infrastructure, affecting everything from parts delivery, personnel mobility, and shipping activity at the country’s ports.’’

Toyota idled all its Japanese factories through tomorrow, halting production at 45 percent of the auto giant’s global production. Nissan, Honda, Suzuki, Mazda, and Mitsubishi all reported varying amounts of damage and temporary shutdowns at their Japanese plants.

It is unclear whether the shutdown of Japanese auto parts suppliers will last long enough to affect production in the United States. Honda has already projected that its operations in the critical North American market would not be greatly affected.

There are also potential disruptions in the supply and shipping of electronics, particularly of key materials used in the manufacture of LCD panels, according to a report by analyst Dale Ford of IHS iSuppli, which researches supply chains.

Japan’s central bank said yesterday that it will put a record $183.8 billion into the economy to keep the country’s financial system stable and its trading system functioning.

Japan is already groaning under government debt equal to twice its yearly economic output, proportionally the world’s largest load. But analysts said the country should have the financial muscle to deal with the reconstruction and be able to borrow what it will need to bounce back.