The ongoing nuclear crisis in Japan, resulting from a powerful quake and tsunami, would serve as a catalyst for the nation to come out economically stronger following the recent years of downturn, a leading economist has said.
Nomura Global Chief Economist Paul Sheard recalled how the country rose magically from the nuclear ashes to become and remain for four decades the world's second-largest economy.
He said the twin tragedies, which may have killed over 20,000 people and flattened a vast swathes of regions, could well be the trigger for a radical change - both economically as well a politically.
Pointing out what Japan made out of the world's worst nuclear tragedy in 1945, Sheard said the Japanese will do an encore this time too.
Sheard, however, admitted he was cautiously optimistic that the current tragedy will galvanise the Japanese and serve as a catalyst and spur its economy.
Though it is far too early, he sees some positive signs in this regard as Tokyo looks to bury the quake-crippled Fukushima nuclear plant in sand and concrete to avert a larger tragedy.
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First, the disaster has already altered the political landscape, at least in the short term. There is a sense of national urgency from across the disparate Japanese politicians with Prime Minister Naoto Kan having full political backing.
Second, a more expansionary fiscal and monetary policy mix is on its way - this is exactly what a deflation- ridden Japan needs, the economist said.
Japan's GDP deflator has fallen by 15% since its peak in Q2 of 1994 while the same for US, the world's top economy, was up 40% during the same period, he said.