The Impact!

A 1GB memory card costs around 100-200 bucks. But today when I went to buy one, I had to shell out around 300 bucks for the same. The shopkeeper says that the prices of other electronics are also shooting up! The reason being – Earthquake followed by Tsunami in Japan. Now that is how globalization affects you. This is the impact at a very micro level.

On the macro level the crisis in Japan has sent ripples across the global economy, from Sendai on the battered Japanese coast, to Paris to Jaipur, India.

Effect on the Prices of Oil - The price of oil has come below 100 dollars a barrel. This can be understood because Japan is one of the biggest importers of oil, and as a result of the calamity many of the local production units have been temporarily shut down. But in the future, the prices are expected to soar as the Japanese would look for alternatives to the Nuclear Energy!

Effect on USA – Only weeks ago, many economists foresaw a quickening of the recovery of the American economy, but now it seems that they have awaken to a harsh reality. Tsunamis, radioactive plumes, Middle East Revolutions, a new round of the European Debt Crisis and a still weakened US economy would derail a tenuous bounce back. In the long term if the Japanese companies and investors retrench, selling some Treasuries and investing fewer Yen overseas, the pain would grow.

Automobile Sector - General Motors last week announced that it would suspend product at its 923-employee factory in Shreveport, La., which manufactures Chevrolet Colorado and GMC Canyon models, because it has already run short of Japanese made parts. Volvo, the Swedish automaker, is the most reliant of the European car companies on Japanese parts — seven of its suppliers are based in the region ravaged by the earthquake and tsunami, including one on the cusp of the radiation zone. Volvo managers are trying to determine how many parts already were loaded on ships.

Manufacturers from Semiconductors to Steel have temporarily shut down operations in parts of Japan. That has disrupted the flow of the goods around the world. Japan’s semiconductors are used in Apple Computer products and South Korean consumer electronics. Shipbuilders in South Korea count on steel from Japan.

Insurance Firms - The cost to insurers well may rival the record $62 billion that followed Hurricane Katrina. Shares of Hartford Financial Group, which derives about 15 percent of its revenue from Japan, fell about 2.8 percent. It is doubtful that the crisis will bring down an insurance company. But the losses could lead to higher insurance rates for customers around the world. And as insurance company raise cash to pay off claims, but may be forced to sell assets, thereby hurting the values of seemingly unrelated equities around the world. While the scale of such forced selling relative to the size of global markets won’t be huge, it could still be a factor for investors to consider.

Impact on India – The world’s largest Nuclear Power Project coming at Jaitapur, Maharasthra might come to a halt because of the risk associated with the project. Especially after the Nuclear Disaster in Japan following the Tsunami, the local population has taken their protests to the streets. "My house is two-and-a-half km from the project. I'm worried about the future of my children. I have been watching on TV what's happening in Japan," said Raju Wadekar, a fisherman. The Wadekar family in Jaitapur is glued to the TV set ever since the earthquake caused a nuclear meltdown in Japan. It is natural that the local population fear for their safety. Also, as far as the IT Sector is concerned, the Indian IT giants like the Infosys and the Wipro fearing for their employee’s safety in Japan have called them back.

In the longer run, even though prices of oil might fluctuate but overall things would be restored back to normalcy.

Everything said, there is not an iota of doubt that the Japanese won’t be able to bounce back. It is just a matter of time when the Yen comes into the picture again.