Will the Japan earthquake affect your business costs?

Friday, 18th March 2011

After the devastating earthquake and tsunami, the cost to the economy and business is now being calculated. The major issue affecting production coming out of Japan is the ongoing nuclear problems at Fukushima nuclear power station, preventing power being returned to some areas and workers unable to commence production.

Japans automotive market is expected to suffer some of the worst affects of the crisis. Even if vehicle production can be restored, exports are expected to be heavily delayed as damage to the infrastructure and ports is going to cause further delays. Some manufacturers do have production sites outside of Japan but the majority of parts are still manufactured in Japan, potentially causing some shortages ahead as well as pushing up prices for what stock is available. Due to the power issues, it is thought that manufacturing in Japan could be hampered for months with blackouts. There are many auto builders in Japan including Honda, Mazda, Mitsubishi, Nissan, Subaru, Suzuki and Toyota. There is also many motorcycle constructors based in Japan including Yamaha and Kawasaki who will also face problems in the coming months.

Food stuffs that are exported from Japan will also be heavily affected, not only by the damage but by fears over contamination with radiation. In fact, spinach, cabbage, broccoli, cauliflower, turnips and milk have already been banned by China and other Asian countries as well as the European Union. The United States and Australia have halted imports of dairy and produce from the four affected Japanese areas. Japan food exports include such as soybean paste, soy sauce, beer, meat as well as traditional Japanese items.

Consumer electronics is another massive export for Japan and this will also be affected in the same way that is affecting the automotive industry. Exports will be delayed or even cancelled as manufacturing centres take time to repair and begin production again. Japan makes 30 per cent of the world's flash memory , used in smart phones and digital cameras as well as computer RAM. It has been calculated that memory and touchscreen components made by Toshiba make up a third of the iPads costs. If Japan is unable to recommence production quickly, it could lead to companies looking elsewhere such as Taiwan. but this will still have an impact of the cost of consumer products at the end of the chain.

Cost Saving Expert does not expect huge price rises to be felt immediately but is advising buyers to keep an eye on prices and be prepared to act quickly if you are looking to purchase in large numbers as the stock may not be available.