The effects of last week’s earth­quake and tsunami in north­east Japan are likely to have an eco­nomic impact far beyond that region, according to recent news reports. We spoke with Northeastern’s Allan Bird, the Darla and Fred­erick Brodsky Trustee Pro­fessor in Global Busi­ness, who lived in Japan for eight years, and has worked with Japanese gov­ern­ment and private-​​sector orga­ni­za­tions since 1974.

What are the imme­diate impli­ca­tions for Japan’s economy and the global economy? How will Japan finan­cially sup­port the efforts (recon­struc­tion, etc.) nec­es­sary to recover from the dev­as­ta­tion caused by the earth­quake and tsunami?

The Japanese economy has been limping along for nearly two decades, lacking vitality and wrestling with the chal­lenges of a matured man­u­fac­turing sector and an aging pop­u­la­tion. The damage to the infra­struc­ture in the region most affected is sig­nif­i­cant and will take years to rebuild — roads and bridges have been washed out, ports have been severely dam­aged, and the ongoing nuclear trou­bles will not be easily resolved. At the national level, just-​​in-​​time delivery sys­tems have been severely impacted due to the need to cut back on energy con­sump­tion. Japanese pro­duc­tion and man­u­fac­turing is tightly inte­grated, so wide­spread dis­rup­tions have rip­pled through the system.

Already we are seeing Japanese com­pa­nies shift dollar hold­ings and repa­triate cap­ital from over­seas oper­a­tions to pay for the recovery. The Japanese cen­tral bank is also con­verting dollar hold­ings in order to finance the recon­struc­tion efforts that will be required.

What long-​​term impact could these recent tragedies have on Japan’s eco­nomic power and on global business?

The Japanese economy is the third largest in the world, behind only the United States and China (which only recently sur­passed Japan). The eco­nomic impact on Japan will have global ripple effects. At the same time, there has been a sense in Asia over the last decade that the future belongs to India and China, and that Japan’s influ­ence will wane. These events will hasten the decline of influ­ence and increase the per­cep­tion that Japan is less important.

Taking a longer view, how­ever, I think it would be unwise to count Japan out. Sixty years ago, it was widely believed, fol­lowing its near com­plete eco­nomic dev­as­ta­tion from World War II, that Japan would become a pros­perous but rel­a­tively unim­por­tant eco­nomic player in the world. We know how that turned out. It would be unwise to dis­count the drive and ambi­tion of the Japanese as they work to rebuild their country and their economy.

Are there some indus­tries or exports that might be more affected than others?

Rather than focus on spe­cific indus­tries or exports, it may be more useful to focus on the types of firms most affected. Only one in eight Japanese workers is employed in a com­pany with 300 or more employees. The region most affected by the quake and tsunami is largely pop­u­lated by small and medium-​​sized firms, many of which sup­plied parts for the auto­mo­tive industry or com­po­nents for the elec­tronics industry. Man­u­fac­turers around the world — not just Japanese, but other Asian, North Amer­ican, and Euro­pean firms — are now in a scramble to find replace­ment sup­pliers. At the same time, recovery for many of these firms will be dif­fi­cult due to the fact that they were already grap­pling with an aging work­force and a move­ment by the younger gen­er­a­tion away from rural regions.