Canada will lose out on short-term trade as Japan recovers
The Canadian Press
Published Friday, March 11, 2011 8:07PM EST
TORONTO - Canada will feel the economic impact of the powerful earthquake and huge tsunami that swept away everything in its destructive path in Japan, but the effects should be short lived, experts say.
They suggest Canada stands to lose out on short-term trade as Japan focuses on recovering from the 8.9-magnitude tremor Friday -- the most powerful earthquake in the area in nearly 1,200 years.
Japan imported about $9.2 billion of Canadian goods last year, including wheat, lumber, coal and minerals used in manufacturing.
But with several Japanese factories shut down following the disaster, including those of automakers Toyota and Honda, the focus will be on recovery rather than producing cars or other goods like electronics, predicts Tim Richardson.
Richardson, former head of the now-defunct Canada-Japan Trade Council and now a professor at the University of Toronto, said Japanese business executives "will be told in emails from head office to be very concerned about expenditures."
"The Japanese companies will not be producing their manufactured products that require the constant imports," he said.
The fallout from the 8.9-magnitude quake and the seven-metre-tall wave that swept over parts of Japan, will also likely affect Canadian banks, software and telecommunications companies that work with the exporters, he said.
But Richardson said Canada has a good reputation in the lumber and construction industries and exports will bounce back as Japan rebuilds.
Sherry Cooper, chief economist at BMO Financial Group, said the disaster an ocean away might draw more foreign investment into Canada, reducing the impact of the lower trade figures.
"Canada will continue to be seen as a safe haven. We are truly an oasis of calm in a world that is battered by both natural disasters and financial disasters. On a relative basis we continue to be performing very well," she said.
She added that Japan buys a fair amount of Canadian products, but the number is small compared to the U.S., where Canada sells 80 per cent of its exports.
"It's certainly meaningful but it's not going to push our economy into recession," she said, adding that the Japanese disaster in addition to the political turmoil in the Middle East, and rising food and oil prices will ultimately hit Canadian wallets.
"But as we see these developments continue...we can't help but be impacted. Consumers are feeling the pinch."
Both Cooper and Richardson cautioned that the extent of the economic impact in Canada won't be clear for days because the quake happened on a Friday evening and it is not yet clear how much damage has been sustained by Japanese infrastructure.
The northern city of Sendai, which was close to the epicentre of the earthquake, is a major transportation hub for the country.