Japan quake threatens industry growth

SHOCK WAVES: Details of the economic fallout are still emerging, but early news of repercussions stretched from top automakers to the country's biggest power company


Fri, Jul 20, 2007 - Page 10

The mammoth earthquake that ravaged northern Japan this week did more than take lives and trigger radioactive leaks. It nailed some of the most important industries undergirding growth in the world's second-biggest economy.

Details of the economic fallout were still emerging days after Monday's 6.8-magnitude earthquake shook the Sea of Japan coast. But early repercussions stretched from Japan's top automakers to the country's biggest power company.

Toyota, Nissan, Honda, Mitsubishi and Fuji Heavy Industries, the maker of Subaru vehicles, halted production at some factories because a key parts supplier, Riken Corp, was damaged by the temblor.

Meanwhile, fears of an electricity shortage in the nation's capital swelled after the world's biggest nuclear power plant was shut down indefinitely because of safety concerns. Tokyo Electric Power Co, Japan's largest utility, was scrambling to ramp up conventional power output after closing the quake-damaged Kashiwazaka-Karima facility in Niigata prefecture, in north-central Japan.

"We will work to the utmost to avoid damage to the economy," Chief Cabinet Secretary Yasuhisa Shiozaki said yesterday.

"For the factories that suspended operations, the related ministries are striving hard for their early resumption," Shiozaki said.

Monday's quake, which killed 10 people and caused a slew of problems at TEPCO's nuclear plant, including a fire and leaks of radioactive material into the ocean, has wreaked havoc companies with factories in the region and created a logistics nightmare with damaged roads.

Autos and electric power are key to Japan's export-oriented economy, which is staging a healthy recovery from more than a decade of doldrums. While any lasting impact on overall growth will likely be limited, even a small blip would be unwelcome.

"Naturally the impact will be negative, but the government will likely increase spending in public works to repair bridges and roads so there should be some offsetting effects," said Masaaki Kanno, chief economist at JP Morgan in Tokyo.

The auto companies' troubles stemmed largely from damage at a factory run by Riken, a supplier of key transmission and engine parts.

Toyota Motor Corp, Nissan Motor Co, Mitsubishi Motors Corp and Fuji Heavy Industries Ltd announced late on Wednesday they would temporarily halt some of their lines for lack of components as Riken repairs its facilities. Honda and truckmakers Mitsubishi Fuso and Hino joined their ranks yesterday.

"It's usually deafening with all the equipment running. But we've had to shut everything down," Riken spokesman Takashi Fujii said while giving a tour of the damaged plant to reporters. "The equipment is very sensitive and it needs to be on a level surface. But most of it was tilted in the quake or completely moved out of position."

Riken said about 80 percent of the damage had been repaired as of yesterday afternoon and that it was hoping to restart early next week.

Analysts said the delay -- if short enough -- probably wouldn't affect domestic or overseas deliveries for big players such as Toyota, which has enough inventory to cover a few days of lost output.

Elsewhere in the quake zone, Fuji Xerox Co halted a damaged printer plant.

For Sanyo Electric Co, Monday's rumble was a close call.

In 2004, one of its semiconductor plants in the region was hit by an earthquake that also registered 6.8 magnitude. That ended up hurting the company's earnings.

Sanyo briefly closed the plant again after Monday's quake but reopened it after determining there was no damage. Any financial impact this time would be minimal, it said in a statement.

Of wider concern was an impending electricity crunch.

Tokyo-based TEPCO warned on Wednesday that the closure of its seven-reactor Kashiwazaka-Karima plant, which provides up to 13 percent of the utility's total electricity output, could trigger a power shortage for the busy capital.

TEPCO was considering bringing six retired thermal power generators into operation.

The utility has also asked six other Japanese power companies to sell it emergency electricity from late this month through the end of September.

In 2003, TEPCO was forced to temporarily halt all of its 17 nuclear reactors for several months after admitting it manipulated safety data in the late 1980s and early 1990s. The company managed to scrape through that summer by firing up retired thermal plants and buying emergency power.

TEPCO's shareholders have been anything but forgiving this time, driving the company's share price down 10.3 percent since its last close before the quake.