Assessing the Risks of an Economic Downturn in Japan

The earthquakes, tsunami, and nuclear disaster in Japan will undoubtedly have a negative effect on Japan’s economy, but there is more to the story. Japan’s economy was not structurally sound before the earthquake happened, relying too much on exports and without a strong growth engine. Japan is also hugely in debt, and its aging population will become a problem in the coming years as well. The economy will most likely withstand the earthquake, especially considering the positive effect reconstruction efforts usually have on an economy after such an event, although Japan’s economy is extremely vulnerable and there are risks in many different areas that could tip it into recession.