Japan’s past struggles with managing inflation is well documented. The Japanese central bank now faces a different problem; managing the economic aftershocks of the massive earthquake, tsunami, and nuclear radiation. In the wake of these catastrophic events, the Bank of Japan has provided a massive injection of liquidity, roughly 15,000 billion Yen ($186 billion US), into the economy. Many notable economists are unsure of the danger to global economic stability.

At this stage, it’s too early to come up with meaningful estimates of the overall impact of the terrible events in Japan. And, in economic and financial terms, the effects may be dominated by other challenges facing the global economy, including still elevated oil prices and rising interest rates. And much still hinges on the radioactive threat to Japan’s more urbanised areas: if that threat fails to transpire, the Kobe quake provides a useful framework but if the worst happens, all bets are off.

–Stephen King, Chief Economist for HSBC