Tuesday, March 15, 2011

Comparing Quakes Kobe vs. Today

There is some buzz in the business media whereby analysts are comparing the impact of the current horrific Japanese earthquake and associated nuclear crisis to the destruction caused by the “Kobe” quake that occurred in Japan in January of 1995.

While the “Kobe” quake was clearly intense and tremendously damaging killing over 6400 people and causing over $100 billion in damage, it appears that the outcome of the current quake is likely to be far worse.

First, the “Kobe” quake was notably less intense at magnitude 6.8 (still supremely intense while the current was an almost unheard of 9.0 magnitude) and did not trigger a tsunami or any significant issues with the nation’s nuclear power plants.

Further, the nation’s industrial production barely registered the event only slightly pulling back for a few months then resuming the trend growth before the end of the year.

Also, it’s important to note that Japan was only some 5 years into their historic period of malaise and likely in significantly better fiscal, psychological and political shape (comparatively) than they are today some 21 years post-boom.

Look at the chart plotting Japan’s industrial production for a sense of the experience during 1995 and follow this data-point for a sense of the level of economic disruption going forward.