Japan's
Economy Grinds To A Halt After Earthquake Paralyzes Critical Supply
Chains
17
April,, 2016
Earlier
today Toyota was one of many Japanese companies to announce that it
will suspend most car production across Japan as a result of critical
supply chain disruptions caused by the recent destructive
earthquake and numerous aftershocks.
All of the major assembly lines will be shut down across its four
directly-run plants, and Toyota will be halting production in stages
at other group companies as well.
According
to the Nikkei Asian Review,
most of the Toyota group in Japan will be effectively shut down
through at least the end of this upcoming week, with a production
loss of as many as 50,000 vehicles, including brands such as Prius,
Lexus, and Land Cruise.
"Decisions
regarding recommencement of operations at plants in Japan will be
made on the basis of availability of parts," the company said in
its announcement.It isn't just Toyota.
Numerous
other manufacturers also announced extended stoppages due to damage
to factories. More details
from Reuters:
- Honda Motor said it would keep production suspended at its motorcycle plant near the quake-hit city of Kumamoto in southern Japan through Friday, though Nissan Motor Co 7201.T said it would resume operations at its plants north of the epicenter from Monday.
- Sony Corp said production would remain halted at its image sensor plant in Kumamoto, as the electronics giant assessed structural and equipment damage. But the company said it had resumed full operations at its plants in nearby Nagasaki and Oita which also produce the sensors - used in smartphone cameras, including Apple Inc's AAPL.O iPhone.
- Semiconductor manufacturer Renesas Electronics Corp confirmed it had sustained damage to some equipment at its plant in Kumamoto which produces microcontroller chips for automobiles. Having suspended operations following the first earthquake on Thursday, the chipmaker said it would assess damage at the entire facility before deciding when to resume production.
The
earthquakes on Thursday and Saturday, which killed at least 41
people, reflected the vulnerability of Japanese companies to supply
chain disruptions caused by natural disasters, and also highlighted
the "just in time" philosophy pioneered by Toyota and
followed by many others.
The
problem is when as a result of a massive unpredictable event, the
supply chain grinds to a halt, so does the economy, which
incidentally is a topic we covered back in 2012 when we presented a
paper on "A
Study In Global Systemic Collapse",
where we showed just how little margin of error there is in global
supply chains, and how quickly the global economy can devolve into
pure chaos if an unanticipated, global event were to strike.
T
o
be sure, as a result of the stoppages, Japan's GDP will take a
substantial Q2 hit as firms such as Toyota are forced to shut down,
dealing yet another blow to Abenomics; the good news is that this
event may give U.S. carmakers an opportunity to burn through much of
the piling up excess
inventory that has been building up over time.
But
the best news is for none other than Abe and Kuroda: with Japan soon
facing another recession, which for those who are keeping count will
be approximately the sixth in the past 7 years...
...
at least Japan's authorities will have nature to blame it on, instead
of the far more devastating than any Earthquake could ever possibly
be Keynesian lunacy that is Abenomics.
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