“We believe the consequences of the temporary deceleration in Japan, as it recovers from last month’s disaster, will not be permanent and there will be little long-term negative consequences for global markets.

“Volatility, as measured by the Volatility Index, spiked in March and has now largely returned to normal, but there is still nervousness and the possibility of short-term fluctuation.

“It’s never possible to accurately predict the future, but the lessons learnt from the Kobe earthquake in 1995 and the Chernobyl disaster in 1986 provide some guidance on what may happen over the coming months.

“The historic patterns suggest that, while the disruptions appear enormous in the short term, in the long term they will not be sustained.

“For instance, we expect that short-term raw material exports from Australia to Japan will slow, as Japanese manufacturers take time to rebuild capacity, but this is likely to be compensated by higher prices for raw materials, oil and liquefied natural gas.

“Over the medium term, we believe that any growing demand for alternative forms of energy from Japan, combined with rising coal prices, may provide an opportunity for Australia if the alternatives chosen include thermal coal or gas.”

Mr Padowitz said that markets tend to over-react and then recover more quickly than expected.

“After the Kobe earthquake, the local economy recovered at a steady pace despite the widespread devastation. Less than 15 months later, manufacturing activity in greater Kobe was at 98 percent of the pre-quake levels[1].

“This quick rebound was likely a result of the enhanced procedures and updated machinery acquisition to counter losses, as well as the government stimulus which accelerated processes once production had resumed, and this could well be the case this time.

“Reports from the World Bank provide further comfort by highlighting that reconstruction projects contribute to growth by putting people to work, and replacing old infrastructure with more efficient structures helps expand the nation’s productivity and growth,” Mr Padowitz said.

He added that the nuclear threat is one that could have prolonged consequences for the country and the global economy.

“Should the situation continue to deteriorate, Japan will likely be required to resort to fossil fuels, such as natural gas, for energy.

“Further, we are now seeing the impact of the nuclear crisis on other projects around the world.  For example, in Germany Chancellor Angela Merkel has announced a three-month moratorium on plans to extend the operation of its nuclear power plants, and Switzerland has also suspended plans to replace five plants.  Italy and Poland have decided to rethink prior decisions to invest in nuclear energy, all of which adds to uncertainty,” Mr Padowitz said.