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Major countries face triple blow

18th March 2011

Writing in The Telegraph, Jeremy Warner warns that Japan’s economic crisis could be ours too.

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Three decades ago, Japan’s economy was held in awe but in recent years has ground to an ignominious halt.

It has become the forgotten country but some may argue the disaster of the earthquake and tsunami might just prove the shock that the country needs to rid itself of the political inertia and economic paralysis into which it has fallen.

However, with it facing three big challenges of excessive public debt, energy insecurity and an ageing population, its future may be largely pre-ordained.

The banking crisis that hit Japan 20 years ago has been replicated across the west, though Japan has coped with that issue relatively well.

But the economic effect of the disaster will be felt beyond Japan.

If the nuclear debacle leads to more than just a temporary moratorium on new nuclear build elsewhere in the world, it has certainly got the potential very seriously to upset the delicate balance in global energy supply.

However, with a lack of viable alternatives in economies such as China or India - which alone have plans for more than 200 new nuclear reactors, adding around 50% to worldwide nuclear capacity – the probability is that they will eventually go ahead.

But it is now possible that the natural disaster could tip Japan into a full-blown fiscal and financial crisis.

What is most likely to happen is that Japan returns to where it was.

There must come a point where economies simply outgrow their capacity to grow.

For years now, Japan has been blazing that trail. In the West, we may not be far behind. Japan is our future: we'll be lucky if we handle it as well as they have.

 

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