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23 March 2011

Japan quake becomes world's costliest natural disaster

TOKYO (Reuters) - The Japanese government on Wednesday estimated the direct damage from a deadly earthquake and tsunami that struck the country's northeast this month at as much as $310 billion, making it the world's costliest natural disaster. The first official damage estimates will serve to map out disaster relief plans and emergency budgets to fund recovery costs.

Tokyo said the estimate covered damage to roads, homes, factories and other infrastructure, and eclipses the losses incurred by other natural disasters such as the 1995 Kobe quake and Hurricane Katrina in 2005. The figure could go even higher, as the estimate does not include losses in economic activity from planned power outages or the broader impact of a crisis at a stricken nuclear power plant in Fukushima, which economists say pose the biggest risks to the economy.

"The impact from the planned power outages is likely to be significant," Fumihira Nishizaki, director of macroeconomic analysis at the Cabinet Office told reporters.

The upper end of the 16-25 trillion yen ($197-308 billion) estimate range would amount to about 6 percent of Japan's gross domestic product. "This quake will cause the condition of Japan's economy and output to be severe," Bank of Japan Governor Masaaki Shirakawa told a parliamentary committee.

Speaking separately, central bank board member Ryuzo Miyao repeated the bank's pledge to take appropriate policy action if needed to support the world's third-largest economy. "We need to be mindful that the quake's negative impact on the economy, at least on the supply side, may be bigger than the Kobe quake 16 years ago, and be prolonged," he added.

In its initial response to the disaster, the central bank doubled the funds earmarked for purchases of a range of assets and started pumping record amounts of cash into the money market to prevent it from seizing up. It later followed up by joining forces with other G7 central banks in a rare coordinated move to keep a rallying yen from inflicting further damage to the economy.

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