The earthquake and tsunami have caused huge human and material losses in Japan, and the threat of nuclear radiation has added to people's woes. Many people have been injured and many traumatized.
The Japanese are resilient people, having gone through many traumatic experiences in their history. There is need for them to rebound again, but today's Japan is different from what it was in 1995, when a devastating quake struck Kobe. Japanese today are not as positive about their future as they were during some of the past catastrophes.
Owing to the level of the damage to Japanese factories and infrastructure, it will be weeks or even months before the country's supply chain returns to normal and its manufacturing level gets back to its previous level. While most factories will be running as usual in the next few months, it is likely that some of the older and less efficient ones will be shut down. It will thus be cheaper and easier to use manufacturing bases in China and other low-cost countries than to rebuild the factories in Japan.
Global cost competitiveness is becoming more important than maintaining employment in Japan. There has, however, been a continuing and steady decline in manufacturing in Japan over the past two decades, and that has coincided with the growth of manufacturing in China.
One example of the change in Japanese companies' strategy is that less than half of the automobile manufacturing capacity of Toyota, Nissan, and Honda is in Japan. With the triple disasters wreaking havoc in Japan, its automobile companies are expected to keep increasing manufacturing outside the country, and China looks like an appropriate destination for that.
A similar scenario applies to consumer products such as TV sets, music players, and mobile handsets. Companies such as Sony have already moved much of their manufacturing to other countries, and this trend will continue. The production of many semiconductor products will steadily move outside Japan, too, with perhaps the establishment of strategic relationships with other countries facilitating this migration.
Is this trend bad for Japan? No, if new industries are built to take advantage of the opportunities in the global market. Japanese companies can excel especially in medical electronics that need among other things different types of sensors, fiber optic links and high-resolution displays. There is a need for a new high-tech and vibrant Japan to emerge.
Japan's population is aging, and young, educated Japanese do not want to take up factory jobs that involve repetitive work. Earlier, there was a migration from agriculture to factories. Now, there is a migration from factories to the services sector and knowledge-based industries. In auto factories, robots are increasingly replacing people, but that is not enough.
Japan has a massive task of rebuilding its infrastructure, especially to ensure that enough electricity is available to support the needs of its industrial and commercial organizations. While the electricity problem is already severe, it will become even more so when a number of factories around Tokyo and in the south return to full production mode. Japan will take months to upgrade its power grid and ensure supply of enough electricity to meet the industrial, commercial and household demands.