New Zealanders could face higher car and appliance prices as Japanese manufacturers yesterday stopped production in the wake of the earthquake and tsunami on Friday.
Craigs Investment Partners adviser Sam Wilson said the devastation in Japan would have wide-ranging effects on global markets and with many of New Zealand's new and used cars coming from Japan, he would not be surprised to see a price increase.
Toyota, the world's top car maker, as well as Nissan and Honda, suspended production in all of their auto plants in Japan, starting yesterday.
It was uncertain when production would resume.
Car production relies on myriad parts suppliers and a network of roads and ports for efficient shipments.
Honda said the production halt would cost the company about 4000 vehicles a day.
Mr Wilson said car and appliance plants had been shut down and it was unclear when they would open.
With damaged eastern seaboard ports closed, there was also no indication when shipments in or out could resume.
Cars awaiting shipment had been swept off wharves.
The Tokyo sharemarket opened down 5.5% yesterday, but by late afternoon was down 4.5%, having clawed back 1% , he said.
Asian, Australian and the NZX markets were all down through the day as the impact of the quake set in.
"We have had such a strong rally in the past weeks that it didn't take much for money to go off the table."
One of the things for investors to consider was how the Japanese Government would handle the situation, he said.
It had injected 7 trillion ($NZ115.5 billion) into money markets to try to steady financial markets.
By flooding the banking system with cash, it hoped banks would continue lending money and meet the likely surge for post-earthquake funds.
"The bank will continue to grasp the situation of the financial markets and business operations of financial institutions and stand ready to respond and act as necessary," the Bank of Japan said in a statement.
Mr Wilson said Japan was the most indebted developed economy, with debt running at 200% of gross domestic product.
Even countries like Greece were not close to Japan.
Japan had received a credit rating downgrade earlier this year because of the level of indebtedness.
What saved the Government was the high level of savings from its own citizens.
Japan avoided high interest rates during the global financial crisis by borrowing off its own citizens, he said.
Fonterra reported its Tokyo office was closed and it was closely monitoring the situation after the country's multiple disasters.
"Japan is an important market for us but it is too soon to say what effect the earthquake and tsunami may have on our business," the dairy co-operative said.
Fonterra said its 69 staff in Japan were safe and it was making plans to ensure their continued safety.
Asia was the second largest consumer of Fonterra's dairy ingredients after America, making up about 40% of Fonterra's total sales across the globe.
Brent crude oil yesterday fell by more than $US2 ($NZ2.73) to below $US112 on investor pessimism that economic growth would slow in the wake of Japan's earthquake and tsunami, while unrest easing in the Middle East threw the focus back on to ample oil supplies.
April Brent fell $US2.32 to $US111.52.
It slid $US1.59 on Friday, when Japan's strongest earthquake on record shut refineries and other industrial plants in the world's third-largest oil consumer.
Japan was also one of the world's largest producers of steel, but 40% of production was affected by the quake, Mr Wilson said.
Steel prices could be expected to rise, although other Asian countries could pick up the slack.
Thermal coal prices were also expected to rise as Japan supplemented nuclear electricity production with fossil fuel production.
The country was already one of the world's largest consumers of hard coking coal for its steel production and now faced increasing imports of thermal coal for electricity generation, he said.
