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Japan disaster likely to be world's costliest

Published:Friday | March 25, 2011 | 12:00 AM

Japan's government said the cost of the earthquake and tsunami that devastated the northeast could reach US$309 billion, making it the world's most expensive natural disaster on record.

The extensive damage to housing, roads, utilities and businesses across seven prefectures has resulted in direct losses of between yen16 trillion (US$198 billion) and yen25 trillion (US$309 billion), according to a Cabinet Office estimate Wednesday.

The losses figure is considerably higher than other estimates.

The World Bank on Monday said damage might reach US$235 billion.

Investment bank Goldman Sachs had estimated quake damage would be as much as US$200 billion.

If the government's projection proves correct, it would top the losses from Hurricane Katrina. The 2005 megastorm that ravaged New Orleans and the surrounding region cost US$125 billion, according to the Insurance Information Institute.

Japan's estimate does not include the impact of power shortages triggered by damage to a nuclear power plant, so the overall economic impact could be even higher. It also leaves out potential global repercussions.

"The aftermath of the tragic events in Japan will obviously alter the domestic economy," said Takuji Aida, an economist at UBS Securities Japan, in a report. "However, Japan's position in the global economy is such that there must also be some transmission of the shock to other parts of the world."

The Cabinet Office suggested, however, that the economic hit could be softened by the expected upswing in public works and construction as the region rebuilds.

The 9.0-magnitude quake and tsunami on March 11 laid waste to Japan's northeastern coast, killing thousands of people and triggering a crisis at a nuclear power plant. Tens of thousands of people living near the plant were evacuated.

- AP