Japan's Earthquake and the Philippine Economy

I am writing this article in hopes that after posting this, more people would step up and help Japan recover from the effects of the recent 8.9 magnitude earthquake and tsunami. Right now, a couple of people and I are having a fundraiser and all the proceeds would go to Japan. People can directly donate money to helping Japan via the Red cross. If you want to know more about helping out, go here.

There have been mixed reactions regarding the effect of Japan's struggles on the Philippine and world economy. The main conclusion seems to be that there will be a huge impact on the short-term economic effects but not so much in the long run. But why is this so?

To fully understand why, we need to look at some facts regarding Japan's economy:

• Japan is the world's third largest economy
• Japan is our top importer, responsible for 12.3 percent of all our imports
• Japan is the biggest buyer of our products, responsible for 16.2 percent of all our exports
• Japan is among the top three sources of our foreign direct investments (FDI)
• Japan is our largest country donor, in terms of Official Development Assistance (ODA)
• Over a million Filipinos are residing or working in Japan

It can be seen that Japan's economy seems to be very much closely tied to that of the Philippines. So one would expect the damage of the massive earthquake on the Japanese economy would affect our economy as well. In the short-run, an effect would be the decrease in the products they import because of the damage done. Also since Japan is currently in an economic standstill and in the act of rebuilding, Philippine exports to Japan would surely decrease. The stock market value of some Japanese companies is also expected to take a plunge. As of March 14, three days after the tragedy happened, the market has already slipped by 0.14 percent mainly due to the panic caused by it. Both ODA and FDI are expected to slow down as well, because Japanese businesses would be expected to shift their investments towards the areas directly affected by the disaster. 

Since Japan is the world's third largest economy, the effects of the 8.9 magnitude earthquake would surely cause a ripple in the world's economies, not only that of the Philippines. The damage done by the earthquake to the world's third largest economy, coupled with the political uncertainly in Libya and the Middle-East,  China's inflation, oil price hikes, and the unsteady economy of countries in the West, will continue to impact local equities and the Philippine economy. 

So, it is very important that Japan's economy recovers quickly. The first article talks about the thousands of lost lives and the millions that had lost everything they had, while article this talks about how this disaster indirectly affects the Philippines. One way or another, I am calling each and every one of you to help Japan however you can, big or small.

If you have any questions, feel free to leave a comment!