Japan impact on US economy more than realised

DETROIT—The impact on the US economy of the Japanese crisis is far greater than realised, a top trade group said yesterday. US companies and industries rely heavily on Japanese-made automotive products and high-tech electronics, but the US Business and Industry Council said in a report there is an even greater dependence on less well-known Japanese products. These include industrial equipment like machine tools and energy-generating turbines. While the federal data studied by the trade group, which represents 2,000 small- and medium-sized US manufacturers in many industries, was from 2009, it said trade figures for 2010 strongly indicate the reliance rose considerably.

“Many more American manufacturing industries than typically recognised—and especially advanced, capital- and technology-intensive sectors—are vulnerable to production disruptions stemming from the earthquake, and to the aftershocks that may continue for several years,” the council said in a report entitled A Supply-Chain Earthquake? “Such disruptions could greatly slow America’s already sluggish economic recovery, as these industries generate an out-sized share of the country’s best-paying jobs and technological innovation,” it added. However, the council, which has criticised US trade policy for encouraging the shift of too much advanced manufacturing outside the country, also said the instability offers opportunities as US-made products are substituted for the Japanese-made ones, potentially boosting the recovery.

On a broader scale, American economic growth could be expanded by hundreds of billions of dollars annually by limiting import growth rates, the council said. Higher domestic production also would boost the country’s tax revenue without raising taxes. The impact of the March 11 Japan earthquake and tsunami are well reported on the auto and electronics sectors. For example, Japan accounted for more than ten per cent of the transmission and power train parts used in America in 2009, almost 150 per cent higher than in 1997, according to the report. Almost a third of the capacitors—an electronic component—used in 2009 were from Japan, up almost 70 per cent from 1997.

But Japan’s presence is heavy in other products as well. In 2009, Japan accounted for about 15 per cent of the turbines for generating energy sold in the United States, up more than 2,000 per cent from 1997, according to the council. While import penetration rates for 2010 are not available, the council said in most cases the growth rates of US imports of these Japanese products rose dramatically last year.
In the auto sector, numerous automakers have idled plants or cut production to account for a shortage of parts coming from Japan. Nissan Motor Co Ltd said yesterday it would resume normal operations at all its Japanese plants, except its Iwaki engine facility, by mid-April.

The Japanese automaker said the production schedules of its Japanese plants will be determined by the availability of parts. It said the impact of the earthquake through March was a reduction in output of 55,000 vehicles. The damage to some assembly and parts factories by the earthquake in Japan has led to an industry-wide production loss of at least 400,000 vehicles to date in Japan. (Reuters)