June 25, 2018
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Effects of Japan disaster felt all the way to Maine

By Andrew Neff, BDN Staff

BANGOR, Maine — The economic tremors and ripples from the earthquake and tsunami that rocked Japan the week before last are being felt worldwide, including in Maine, according to a local academic and business leaders.

John Mahon, a University of Maine business professor, said the economic fallout from Japan’s natural- and nuclear plant-related disasters could be far-reaching and long-lasting.

“The main thing to keep in mind is the reality doesn’t always match perception,” said Mahon. “You can see that starting now with our food supply, from potatoes to milk. People are afraid of what may occur, much like oil speculation, so we’re already seeing prices start to rise. Everyone in the chain starts to crank things up as soon as the perception takes hold that costs will increase.”

Internationally, Mahon theorizes the disaster may lead to an increase in the cost of borrowing as the Japanese are forced to borrow funds in international markets to rebuild. Also, as Japan’s economy slows down, repercussions may include devaluation of the yen, the dollar and other world currencies. Concerns over nuclear power safety may give an impetus to environmental groups and possibly move some countries away from nuclear energy.

More locally, effects could be both positive and negative. Mahon points out that Japan will need a lot of construction materials such as concrete, steel and wood —  the latter of which Maine has in abundance.

“It could be a boon for paper and pulp product makers or suppliers,” said Mahon. “I’ve seen  estimates that it may be a $31 billion restoration, and if that’s the case, they’ll need our products to rebuild. We have a lot of wood here.”

That’s not to say it’s all good news. Japan’s struggles have already caused many factories to shut down at least temporarily, and that may lead to product shortages and price increases, particularly goods such as car parts and electronics.

“A friend of mine put in an order for the new iPad and key components are made in Japan. All of a sudden, they’re harder to buy because production has lagged or stopped,” Mahon said.

Automotive supplies are another sector directly affected by the disaster in Japan.

“At this point, we haven’t heard of anything other than short delays on some of the components we need to manufacture our parts,” said Jane Boudreau, operations manger for Somic America Inc. in Brewer, formerly known as Brewer Automotive Components. “It’s not something we’ve seen yet. We have a  pretty long supply chain and already had one shipment on the water at the time of the quake and another on the way from Japan that was in port.”

Boudreau said Somic, whose largest customer is Toyota, usually maintains a six-week inventory of components. Some of the parts for components Somic produces are made in Japan, so a potential disruption in the supply chain is a concern. Then again, Somic could benefit by being asked by parent company Somic Ishikawa to fill the part supply gap by increasing production stateside if plants in Japan are temporarily shut down.

“At this point, it’s unclear what effect the situation in Japan will have on us,” said Boudreau. “We’re just going to have to wait and see.”

Greg Guernsey, parts and service director for Varney Buick-Pontiac-GMC in Bangor, said the business has seen no impact from the situation in Japan.

“There’s nothing so far. We may feel the effect more in terms of our Mazda line of cars. Prices are unaffected,” Guernsey said. “We usually have about a month to a month and a half supply of parts on hand, anyway, but as of right now, I have no problem getting parts.”

Mike Hodgkins, general manager at Keystone Automotive in Bangor, said he’s concerned about rising costs.

“To tell you the truth, it hasn’t affected us as yet, but I would expect it would affect us in the future in terms of cost, specifically the price of steel,” he said.

While it may be difficult to predict our economic future, Mahon has no difficulty making one forecast.

“This won’t go away in the short run,” he said. “There’s kind of a perfect little storm brewing and there are too many issues at play all over the world and domestically for this to blow over quickly.”

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