Baseline Japan Disaster Cost Estimates: 3-5% Of GDP; Could Be As High As $1 Trillion

Tyler Durden's picture

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John McCloy's picture

Tyler wouldn't Treasury yields be going up not only on the inability for the Japanese to partcicipate in auctions but the likelihood that they are about to liquidate a large portion of their 860 billion we owe them? 

   Or can the PDs counterbalance that with POMO>

camaro68ss's picture

would make Sense to me. but knowing the FEDs im sure they have something up there sleaves

cossack55's picture

"something up their sleeves"

AHA. An ace a trillion dollar bill....wait

AHA. An ace a ten trillion dollar bill...wait

AHA. An ace a one hundred trillion

You get the point.

John McCloy's picture

I wish my ace in the hole was being able to print money whenever I need it. Too bad they do not sell money printers for your jacket pocket at Wal-Mart then we all would be PHD's. Crazy world were living in ladies and gents. 

NotApplicable's picture

I find it interesting (or should I say sickening) that when I read the cost to be $1T over the next several years, I still have no idea what the cost will be.

Relying on measurement in dollars provides us with no meaningful info whatsoever, especially over time.


Boston's picture

In a Risk-Off period, the newly created, POMO fueled, "wealth" that ran into risk assets would rush out--the amount of these outflow could easily push Treasury prices up, overcoming the effects of any possible Japanese sales.

Also, if Japan sold US Treasuries and then converted dollars back to Yen, what would the skyrocketing Yen do to one of the only bright spots in their economy--their exports?

Misean's picture

A whole lot of Japanese GDP is gonna get consumed locally for a while.

msohn's picture

So should we think about adding USD 1 Trillion to the Japanese government's JPY 969 Trillion of debt and guaranteed debt? That would push the total debt to GDP ratio up by 20% points on top of the 10% increase we might have otherwise expected. Japan ended 2010 with a debt-to-GDP ratio of 201% and will now effectively be at 230% at the end of this year (factoring in the incremental expenditures from this disaster).

tmosley's picture

Considering one out of 75 Japanese just became homeless, and at least one in 3000 is dead, I would say a quick bounce back is pretty well impossible.

I wonder how many individual Japanese people are going to liquidate treasuries to rebuild?

Our hyperinflation might have just found its trigger.

Mad Max's picture

In all seriousness, 3-5% of GDP is quite tolerable.  Smaller countries have recovered from disasters with ten times, or more, that share of their GDP.

Two big uncertainties:

-will it really be contained to "only" 3-5% of GDP?

-will the attempt to rebuild such a prosperous country cause sufficient distortions in energy and commodity markets that the costs are far higher, or have severe effects elsewhere?

Misean's picture

"Smaller countries have recovered from disasters with ten times, or more, that share of their GDP."

Yeah?!?! No shit Sherlock. Probably because 5% of $100 is $5 and 5% of $5T is $250B. Makes a difference.

Vampyroteuthis infernalis's picture

prosperous country

Japan has not been a prosperous country in years. If they had a stable economy, yes, they would come back no problem. In their current predicament, no.

Johnny Lawrence's picture

Or, liquidate stocks, no?

TruthInSunshine's picture

Uh Oh.


Crisis Deepens at Reactor in Japan
As Exposed Fuel Rods Overheat

Emergency Efforts to Cool Reactor Failing, Raising Dangers


Emergency operations to pump seawater into one crippled reactor failed at least temporarily, increasing the risk of a uncontrolled release of radioactive material.

cossack55's picture

More importantly, what is Kudlow's take and what is Cramer's play?

TruthInSunshine's picture

Kudlow said thank God there isn't much more 'stuff' of economic value standing near the reactors, that could get destroyed, and Cramer says go long NFLX.

Cdad's picture

Cramer says buy casual dining stocks.  Consumers not killed by radiation, or are otherwise too concerned to breath fresh air, are super resilient, baby!

Cdad's picture

Prepare for helicopters with cement sling buckets....but whatever you do, don't worry about this situation.  The Japanese government is in control, and they are getting some sweet advice from the US government, to boot I'm sure!

Mass death and homelessness, tsunami flood destruction, drowning, radiation leaks and meltdowns...we have been told by the criminal syndicate known as Wall Street, with the assistance of the Ministry of Truth [CNBC] , that these things are bullish baby!

Never mind the Vix breaking on through that 200, man!  Never you mind.  Just keep your eye on the effervescently adorable E. Burnett and things will be just fine.

cossack55's picture

Would that "sweet advice" be offered by one Jeffy Imelt?  GE designs reactors, JI appointed to WH Econ Council, GE building windmills, where is my damn aluminium foil.

E. Burnett is adorable? How about repulsive unless delivered with three paper bags.

Cdad's picture

E. Burnett is adorable

That is so "last hour" man...get up to speed.  We are now onto our oddly obtuse president talking about green energy.  That will save Tokyo from the soon to be toxic radiation plumes.

Oh..and don't rush with that whole cement  Keep on trying to save burning cores with fire trucks.  Nice...good work!

Where does a fellow apply to be a script writer for the new American Marxist regime?  I need the work.

cossack55's picture

Do they still have access to Yamashita's Gold?

Spalding_Smailes's picture

If all three reactors meltdown ( one being MOX ). Not sure how many people will be doing much of anything in the northern half or most of Japan. They should wait 2-3 weeks before making any long term forecast ...

Rolling blackouts ect ....

bob_dabolina's picture

I'm not a nuclear scientist but can anyone here with a semi-related backround in nuclear science explain what a meltdown means exactly?

I understand the core is melting and I understand that is no bueno, but what would a worse case scenario be going forward? The core ends up in the water table? Does it burn through to the core of the Earth? I'm fuckin' lost.

TruthInSunshine's picture

Look below:


Exposed Fuel Rods Overheat, Raising Risk of Breach


They're talking "breach," right now...massive front page headline of New York Times

ivana's picture

What about shrinking China and exports? What about oil which will/should go much higher under existing powerz scenario? What about population, domestic production, wasted pension funds, years of low yields (can it get lower than that)... possible hyperinflation ... jesus - if this is not a black swan ...???

cossack55's picture

Actually, using similar material that is causing headaches in Japan in a different application would certainly be one way to shrink China. We would be exporting that material at about 1400 miles per hour.

benb's picture

My two cents...Japan is gone.

koot's picture

It is going to be much more than $1 trillion in losses, much more than that because this is going to be world wide effect. 

I want everyone to think not of the economic loss, but the full worst case disaster which could be 3 melt downs with a plume of highly contaminating hot nuclear material ejected into the atmosphere and circulate across the Pacific hitting the West Coast of North America first and continuing all the way around.

Then think of the poor souls who have, are and will be giving up their lives to go into this pending meltdown to fix valves, pumps and vents in order to prevent a meltdown.  These are likely to be Japanese who will be sacrificing themselves to protect the world.  I take a deep bow in silence to give them every respect and feeling I have.

ghostfaceinvestah's picture

$1T = 80% of the size of Benocide's MBS monetization from 03/09 through 04/10.

TWORIVER's picture
Japan nuclear disaster risk seen receding fast, according to Reuters report Click here to read full story
Spalding_Smailes's picture

"At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained," Bernanke said in prepared testimony.

Congress' Joint Economic Committee Wednesday, March 28, 2007 

Bicycle Repairman's picture

"and three reactors will probably be written off"


Probably?  LOL.

It is a bargin my friend's picture

From the BBC blog

1844: Mikan in Tokyo writes: "There is a growing sense that the Japanese government is not telling us the true story. On one end, there is the Japanese media that plays down the nuclear drama and focuses on human drama, and at the other, the foreign media is up-playing the nuclear disaster. In my company I heard at least half the essential staff is being sent to Hong Kong, Singapore or even Sydney. I am preparing to leave Tokyo and/or Japan. So are many of my friends. There is a sense of deserting Tokyo as soon as possible.


TruthInSunshine's picture

Breaking news that, well, sucks -

Exposed Fuel Rods Overheat, Raising Risk of Breach


They're talking "breach," right now...massive front page headline of New York Times.

Cdad's picture

Brother Truth,

You are throwing a seriously cold, wet, cement blanket on the criminal Wall Street syndicate's attempt to save the close of the market by lifting Japanese futures [which is beginning to fail].

You are not a very nice person, are you brother Truth?  Don't you know that a lot hockey helmet wearing brokers on the floor of the NYSE still have casual dining stocks to unload on Average Joe?  Are you not concerned about their commissions?

As for Japan, send in the freakin' cement already!


TruthInSunshine's picture

You raise an excellent point.

I am not a scientist or engineer, but I can only surmise that at least one of the reasons they're not pouring cement and other material over the reactors is because they can't get close enough.

Maybe they don't want to entomb them for other reasons. I don't get the lack of a more robust response.


Bicycle Repairman's picture

Reactor #3 contains MOX.  Enough f'ng around with sea water.  It is time for the Chernobyl playbook and all that it implies. May G-d have mercy on their souls and their families.

Cdad's picture

It is time for the Chernobyl playbook

Amen!  Ready the choppers and cemment buckets!  We have seen this before!  Yes, some people will die...some people being much better than 14 million people.

Cdad's picture

From the NYT article:

“They’re in total disarray, they don’t know what to do.”

I guess they did not follow that whole Chernobyl thingy.

But hey...don't worry....Bob Pisani feels good about today's market action.  The whole nuclear cloud thing is probably already priced in.  After all, it's not like Japan's economy matters to the globe.

"Market shrugs off nuclear terror...bids up $11 burritos as sushi loses bid"



jSixPack's picture

I don't know what it is like at your house but I am about to throttle my twelve year old grandson (bless his pointed little head) if he comes up with just one more contrived question that allows him to use the word "Fukushima"!

cossack55's picture

I would say "give him a dose of lithium and sit him down in front of an old Barney rerun" but before you know it he'd be in CONgress.

sabra1's picture

send in all the bankers to cool off the reactors. by the way, how safe do you think those tsa scanners are? 

cossack55's picture

Good suggestion on cooling solution. Screw the scanners. I don't want Peter the Perv grabbing my junk in a aggresive manner.

Spalding_Smailes's picture

Monday afternoon, Japanese authorities said that they have asked for help from the international nuclear agency, IAEA.

U.S. has also been asked to contribute their expertise in this area.

The Japanese nuclear engineer Masashi Goto said a few hours ago that the next 24 hours will be crucial if one manages to avoid a complete meltdown of this reactor. If that happens, along with a blast, plutonium can be spread over an area twice the size of a conventional nuclear explosion. This is because, according to Goto that these reactors using mixed oxide fuel.

The Japanese expert believes that an explosion at one of these plants will be worse for the population, than if the same happened in a facility that uses ordinary nuclear fuel. 

Bicycle Repairman's picture

The Japanese government needs to consult with the Russian government and their nuclear engineers, since we are quickly heading into a Chernobyl-like situation.

youngman's picture

I don´t think anyone knows what the extent of the damage is at this point and time....I am suprised the markets have held up as well as they and silver..flat pretty much..dollar/ yen....huh??? uranium down....???  The Japanese are tough when it comes to tragedies...they will work together and rebuild...but they will quit more game boys for  awhile...and I don´t think its over yet...more aftershocks etc...

the toxic plume is our problem as the winds blow out to California implode as all the enviro´s claim they have been exposed....sales of radiation equipment in California is booming right now....along with iodine tablets I bet...lead coats for the mooovie stars....and feefee the poodle too...

SilverRhino's picture

Oh, it will go a lot higher as the Tokyo Exodus accelerates