facilities such as branches and ATMs; 2) higher credit costs due to decline in borrower creditworthiness; 3) downturn in earnings conditions due to macroeconomic decline; and 4) the additional risk of impairment to equity holdings due to a stock market decline. More Research here 
The EU's Energy Commissioner Guenther Oettinger said on Tuesday that he wants nuclear plants to undergo stress tests to prove their safety, not only in the EU27 countries but also in neighbouring states, according to Reuters. The comments followed an emergency meeting of nuclear experts in Brussels convened in response to the Japanese nuclear accident.
There will need to be a process to agree the criteria on which the tests will be based. Mr Oettinger referred to the tests as voluntary, but under such close public scrutiny we would expect all EU sites to submit themselves to this initiative.
There are currently 144 plants located in Europe, producing around 30% of the region’s electricity output. A programme of safety testing and any subsequent upgrading work required at EU nuclear sites would represent new business for companies involved in nuclear design, testing and equipment provision.
The counter-argument is that any new work in relation to stress-testing may simply offset delays or cancellations for new nuclear projects that will now inevitably face additional political and public opinion hurdles.
Further update on earthquake impact – In light of information gathered on March 15, it has become even clearer that the restoration of electric power and other infrastructure is critical. Furthermore, the suspension of operations at parts and materials plants pose a risk to the production of electronic components, and the potential impact from the convergence of multiple effects is gradually becoming clearer. See also: Asia Macro Flash: Regional Macro Impact from Japan Earthquake
Earthquake to strongly depress near-term economic activity — Gross prefectural production of four prefectures particularly hard hit by the earthquake/tsunami combined has a 6.2% share of nationwide gross production. Regarding manufacturing production, the four prefectures account for a higher 7.2% share. If we assume that the production level of these prefectures declines by an average of 20-40% for the remainder of March, industrial production in the month would be dragged down by 1.0-2.0%. If a rolling blackout continues, it appears quite difficult for the production level to normalize soon.
Low inventory in the channel — Our channel checks suggest that MGC has stopped taking new orders and has not given any specific date for resumption in production. According to our supply-chain checks, second-largest BT supplier Hitachi’s factories and facilities are not damaged significantly. Hitachi is said to be in a position to take orders but can’t arrange immediate shipments. Our checks with our Japan analysts indicate that MGC’s plants and machines were damaged by the quake, and it may take months for production to resume. Although Hitachi’s plant is less damaged, nuclear fears and the disruption of logistics may prolong the production and delivery of BT materials. Korea Memory Beat: Potential Supply Bottlenecks from the Earthquake The current inventory stock of BT in the Taiwan supply chain ranges from two to four weeks, in our view. Asia Macro Flash: Regional Macro Impact from Japan Earthquake
Food inflation trends show significant disparity across the entire region — Food prices have become a serious issue in VN, IN, KR and CH, but remain relatively benign in SG, TW, MY and PH. We attribute this to four factors: source of food supply, how the food in the CPI basket is defined, FX appreciation, and domestic food subsidy policies. With food prices expected to be problematic this year, coupled with an increase in energy prices, commodityfueled inflation pressures will likely remain a lingering issue for the region.
Energy prices adding fuel to the fire
We’ve recently upgraded our oil price forecast, with our colleagues calling for WTI crude oil prices to reach $100/bbl in 6-12 months’ time (previously forecasted at $93/bbl), after oil prices have already risen about 24% in the last five months. Improving confidence in global recovery should continue to support prices, on top of support from investment flows. 3 The direct impact of energy prices on inflation should be less than that of food, as the weight of energy is less than 30% the weight of food in the region’s CPI basket. Moreover, the pass thru is also blunted in a number of countries in that subsidize fuel and other energy prices to varying degrees –China, India, Indonesia, Malaysia, Pakistan and Vietnam.
Headline already seeping into core
Core inflation pressure is already creeping higher in many countries. We think inflation concerns in Asia go beyond food and energy as the risk rises that it seeps into core. The most acute core inflation pressures can be seen in India, which come against a backdrop of very strong growth and a more prolonged high headline inflationary environment, and in Vietnam where the macro policy credibility of the Central Bank is weak and the currency has sharply depreciated. However, we are also seeing rising core momentum in other countries, particularly China, Malaysia, and Singapore and, to a lesser extent, Indonesia and Thailand. In general, core pressures are seen in the large domestically-driven economies as well ASEAN, but seem generally more benign so far in Taiwan and Korea
Eastern Japan Earthquake / Energy Sector Alert: Looking at the Short-Term and Long-Term Issues
Japan accounts for 3% of sales for DOW and 5% for DD, and both companies have electronics facilities in the region. DD’s research and manufacturing facility in Utsunomiya incurred some damage and is expected to remain closed until assessments are completed. The remaining DD sites in Japan are operational. For DOW, one facility experienced flooding but the rest are operational. We do expect some impact on demand as wafer production has been halted at Shin-Estu Chemical’s Shirakawa plant and SUMCO’s Yonezawa plant. Overall, Japan accounts for over 30% of global semiconductor capacity. See also processor operations being halted
No ships under coverage damaged — The four dry bulk shipping companies under our coverage (EGLE, GNK, NM, and SB) have confirmed that none of their vessels have experienced damage from the tsunami, as all their vessels positioned in the region were far enough at sea to avoid harm.
Actual supply impact limited — Based on our global supply model, we estimate Japan accounts for <10% of global module production and much less at the upstream poly/wafer level with most upstream suppliers focused on the semi market. Additionally, much of this supply is captive to the Japan market. Thus, while the tragic events at the Fukushima nuclear plant should not be negative for pricing, it is hard to see a meaningfully positive impact on renewables.
Conclusion — We estimate that the earthquake-afflicted prefectures of Iwate, Miyagi, and Fukushima account for 5% of nationwide food consumption. Among plants, we understand Kirin’s Sendai plant has been badly damaged. There has been a spike demand for instant noodles, although we expect it to be only temporary.
Plants — At Kirin’s Sendai plant, four storage tanks were damaged and there are no immediate prospects for a resumption of operations. Kagome expects its Nasu plant to take a month or more to get back to normal. There are no reports of major damage at Asahi Breweries, Ajinomoto, or Nissin Foods Holdings. We understand Toyo Suisan's Sanriku aquaculture facilities were damaged, but there was no damage to its noodle facilities. Yakult reports damage to some facilities at its plants in Iwate and Fukushima. JT has suffered from a leak and other damage at its Kanto plant but looks to be able to offset this with increased production at its Tokai plant.
See also Asia Pacific Economics: Inflation, Oil and Impossible Trinity Challenges
