Richard Koo on the Japan Earthquake

We tend to agree with Koo’s view that Japan will recover from this disaster. The Japanese government has engaged in QE in its wake, despite their debt levels at about 200% of GDP. They may claim that they have no other choice but to kick the can. And yet, at what cost, and what is the side effect? We are already seeing soaring prices for food and natural resources. Further, aren’t we allowing the disaster to deepen for the future?

From his report:

In short, the view overseas is that a country with these national characteristics and this level of technical prowess is bound to recover. In that sense, I feel as though the world is supporting Japan from afar. This focus of global attention on Japan should reassure the government that it can take necessary fiscal measures without fear of being downgraded by overseas rating agencies. From an economic perspective, the short-term outlook is bleak, and demand fueled by reconstruction projects is unlikely to emerge for some time yet. But I am confident the Japanese economy will be able to pull through this disaster if the public, the government, and political parties on both sides of the aisle join together and work as one.

http://www.scribd.com/doc/51214712/51113641-Nomura-Richard-Koo-Eastern-Japan-Quake-Leaves-Massive-Damage-in-Its-Wake-15-Mar-2011