May 23, 2011
Summary
◆We have often heard arguments that the post-Great East Japan Earthquake supply bottlenecks would tighten the GDP gap on the economy. However, spin-off effects of supply bottlenecks on the GDP gap will affect many aspects of the economy, which is hard to measure. Thus, we focused on latent capital input, a component of latent GDP, and analyzed the post-quake relationship between supply bottlenecks and GDP gap.
◆In our analysis, post-quake supply bottlenecks indicated three points. First, capital stock breakdowns had a limited impact on the GDP gap. Second, the lower capacity utilization rate had a large impact and the gap temporarily rose to positive territory. Third, supply bottlenecks were not a long-term problem as the GDP gap returned to a standard scenario level when capital stock breakdowns normalized and the utilization rate returned to a standard scenario level.
◆The GDP gap estimated by DIR based on the CAO first preliminary GDP estimate widened its decline from the previous quarter (-3.7%) to -4.6% in Jan-Mar 2011. In other words, a demand shortfall of Y26 trillion. This should reflect the plunge in demand following the quake.
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