Japan may face “irreversible” damage to power-supply capacity from the March 11 earthquake, limiting business activity, Citigroup Inc. said.
“Particularly worrying is the serious blow to the power supply in eastern Japan,” Kiichi Murashima, chief economist at Citigroup Global Markets Japan in Tokyo, said in an e-mailed note dated yesterday. “It is difficult to tell how long this will remain a drag on corporate activity.”
Power supply may be reduced by 54 percent under a worst- case scenario to companies reliant on Tokyo Electric Power Co., Murashima said. That calculation is based on the company suspending operations at all nuclear plants and thermal power plants being unable to resume operating, the note said.
The Nikkei 225 (NKY) Stock Average resumed its slide today as helicopters dumped water on uranium and plutonium fuel rods at a reactor at Tepco’s Fukushima Dai-Ichi power station and after a U.S. official warned of radiation dangers. The benchmark was down 2 percent as of 10:57 a.m. local time after earlier falling as much as 5 percent.
Tepco supplies 32 percent of Japan’s electricity, according to Murashima.
Citigroup’s ``base case'' is that the partially operating Kashiwazaki-Kariwa plant keeps going, other nuclear power stations do not, and operations at thermal stations return to normal “quickly.” Here, the calculation is for a 20 percent reduction in supply to companies reliant on Tepco.
“Reconsidering the economic impact of the earthquake, we cannot help but feel that Japan’s supply capacity may have been irreversibly damaged,” Murashima said.
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