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Japan Earthquake: Economic and Market Impact

The damage from the massive earthquake in Japan will impact the world's third largest economy, but will it derail the global economic recovery? While details are slowly emerging in these early hours, we can look back to the Kobe earthquake of 1995 as a guide. The Kobe quake caused $100 billion of damage to the Japanese economy, but it only took days for the Japanese stock market to recover.

The most direct impact is likely to be seen in Japanese exporters, like Honda, Toyota and Sony, whose production facilities will face disruption in the coming days. Additionally, Japanese insurance companies are likely to see large losses as a result of the claims associated with the earthquake.

The timing of the current quake could be more significant, however, because the global recovery is so fragile. Just yesterday, U.S. stocks tumbled nearly 2 percent on continued concerns over Middle East unrest. Today, Japanese stocks were down 1.7 percent; other Asian markets were lower; European stocks traded to three-month lows and US stock futures are pointing to a lower opening.

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