The Japanese earthquake and ensuing nuclear crisis will affect the economic recovery in the United State despite assurances from the Obama administration to the contrary, analysts say.
Wall Street plunged right after the quake ravaged Japan, wiping out gains made this year on recent hopes that a more robust economy is around the corner
"Most of the analysis done to date has been based on the assumption that the nuclear problem was abating," says Mark Zandi, chief economist at Moody’s Analytics, according to Politico.com
"Now that’s been called into question."
|A file photo shows rubble and debris in Rikuzentakata, Iwate prefecture.
If Japan gets the situation under control the market should recover pretty quickly, Zandi adds
However, while the fundamentals suggest only a modest drop in short-term economic activity in Japan is likely — followed by longer-term gains to come with reconstruction — uncertainty surrounding the events could spook investors enough to derail recovery elsewhere.
"This just ratchets up all the existing uncertainty in a huge way," says David Kotok, chief investment officer at money management firm Cumberland Advisors.
"And I think there are big implications for the U.S. economy. Ten percent of Japanese electrical power generation in permanently gone and now they will have to deal with a possibly catastrophic radiation and health issues."
Still, though, the quake — way more powerful than the one that rocked Kobe, Japan, in 1995 — will unlikely have major impacts on the U.S. or global economies.
"We don't know yet how devastating this is going to be economically, or even in terms of human casualties, but Kobe was able to rebound very quickly and I think there is the same potential here," Mark Skidmore, an economics professor at Michigan State University, tells Reuters.
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