Japan’s troubles affect Malaysia.

Last year, Malaysia's exports to Japan amounted to RM66.3 billion or 10.4 percent of its total exports, while imports from Japan totalled RM66.5 billion or 12.6 per cent of Malaysia's total imports.

"We could see an increase in Malaysia's exports to Japan given the need for building materials and other inputs for reconstruction," said RAM Holdings chief economist Dr Yeah Kim Leng.

He said that during the Kobe earthquake in January 1995, Malaysia's exports to Japan rose by 26.4 per cent that year and 12.5 per cent in the following year, both higher than the rise in total exports of 20.2 percent and 6.2 percent in 1995 and 1996, respectively.

Dr. Yeah said the post-1995 Kobe reconstruction efforts had been estimated to cost US$100 billion (RM304 billion) and this had been cited as one of the causes of Japan's decade-long anemic growth.

"However, relative to the current size of the Japanese economy, the cost amounts to only 2 per- cent of its current gross domestic product," he said, noting that as a high-income country, Japan is in a better position to recover from the tragedy.

Dr. Yeah said the impact on the Malaysian economy is likely to be muted given that the rebuilding in Japan will require substantial imports.

He said concern, however, is on the demand multiplier whereby a slowdown in Japan could result in a loss of engine power for the global economy and for the region, culminating in a downward revision of growth outlook for the region.

"We anticipate lower inflows into Malaysia and possibly higher repatriation as substantial capital is needed for the post-quake rehabilitation," he said.

In 2010, Japanese foreign direct investments amounted to RM9.7 billion, while outflow from Japanese firms totaled RM6.9 billion, yielding a net inflow of close to RM3 billion.