Tohoku quake tests global supply chains and risk appetite

The disaster halted operations across Tohoku and constrained power nationwide, disrupting auto and electronics supply. The Nikkei fell sharply over two sessions, while volatility spiked across Asia. The yen briefly strengthened to record levels on repatriation expectations before coordinated G7 intervention steadied the move. Nuclear concerns at Fukushima further weighed on sentiment and capital expenditure plans.

Global manufacturers flagged component shortages, extending lead times and pressuring margins. Semiconductor supply, specialty chemicals, and precision parts saw bottlenecks that rippled into U.S. and European assembly lines. Shipping schedules were rerouted, and insurers reassessed catastrophe models, raising premiums. Equity correlations rose as investors de‑risked and moved to cash and government bonds.

Credit markets repriced exporters’ risk modestly, while JGBs rallied on safe‑haven demand. We expected reconstruction to support domestic demand later, but near‑term earnings downgrades dominated. Commodity markets were mixed; energy demand expectations dipped, but industrial metals were supported by anticipated rebuild activity.

We lowered exposure to the most supply‑chain‑sensitive cyclicals and added to high‑quality defensives with strong inventory buffers. In FX we hedged JPY appreciation risk tactically and used optional collars around core holdings. For multi‑asset mandates we raised sovereign duration modestly to balance equity volatility while retaining dry powder for selective add‑backs.