The government on Thursday said damage to infrastructure from the earthquake that rocked central Japan on New Year's Day may reach as high as 2.6 trillion yen ($17.6 billion).

The magnitude-7.6 quake that struck the Noto Peninsula in central Japan has added a layer of uncertainty over the economy, amid concerns about the negative effects of aggressive monetary tightening in advanced economies and a Chinese slowdown.

"Full attention should be given to the economic impact of the 2024 Noto Peninsula earthquake," the government said, noting inflation, the conflict in the Middle East and volatility in the financial markets should also be monitored.

The quake flattened houses, and cut off power and water, affecting supply chains and local tourism. According to the Cabinet Office, damage to houses, roads, ports and other infrastructure is estimated to be somewhere between 1.1 trillion and 2.6 trillion yen in the three disaster-hit prefectures of Ishikawa, Toyama and Niigata.

Photo taken on Jan. 25, 2024, shows the Horyu area of Suzu in Ishikawa Prefecture, which was heavily damaged by the magnitude-7.6 earthquake that struck the Noto Peninsula in central Japan on New Year's Day. (Kyodo)

The breakdown includes an estimated 400 billion to 900 billion yen for residential properties, 200 billion to 400 billion yen for nonresidential buildings such as factories and offices, and 500 billion to 1.3 trillion yen for public infrastructure such as roads, water pipes, and port facilities.

By prefecture, Ishikawa sustained the most damage at an estimated 900 billion to 1.3 trillion yen, followed by Toyama at 100 billion to 500 billion yen, and Niigata at 100 billion to 900 billion yen.

According to the office, the hardest-hit areas included many wooden houses constructed in adherence to outdated seismic standards. In Ishikawa Prefecture, 66 percent of residences in Suzu are wooden homes built before 1980, with the ratio at 56.4 percent in Wajima.

Damage costs were therefore calculated based on a maximum 7 on the country's seismic intensity scale, despite the two cities actually registering an upper 6. The same adjustments were made to the municipalities of Nanao and Anamizu for the calculations.

While the office said the figure is calculated automatically based on the strength of the earthquake, rather than actual reports of damage, it compares with 16.9 trillion yen in the aftermath of a massive quake and tsunami in northeastern Japan on March 2011.

Damage after the 2016 quakes that struck Kumamoto Prefecture in southwestern Japan is estimated to have amounted to 4.6 trillion yen at most.

The government also finalized a policy package to support Noto Peninsula quake victims, including a relief payment of 100,000 yen to households that meet certain criteria, such as damage costs totaling at least 50 percent of their property and possessions and an income of 5 million yen or less.

A rebuilding support fund providing up to 3 million yen for completely destroyed properties will also be disbursed to households.

To help boost recovery in tourism, the government will offer a subsidy covering half of travel expenses to the four prefectures of Niigata, Toyama, Ishikawa, and Fukui, capped at 20,000 yen per night.

Prime Minister Fumio Kishida said that a 70 percent subsidy would be considered for hard-hit areas in the future.

Small and medium-sized businesses will get 75 percent of their repair costs for facilities and production machinery, for a maximum of 1.5 billion yen in Ishikawa, and 300 million yen in Niigata, Toyama and Fukui prefectures.

The funding for the package totaling 155.3 billion yen will be allocated from the reserve budget for fiscal 2023, with approval scheduled for the Cabinet meeting on Friday.

As for the country's economy, the Cabinet Office, in its monthly report, maintained the view that it is continuing to recover moderately though there are some signs of "pausing." It lowered the view on exports for the first time in a year, citing weakening demand in Europe.

It is the third straight month that the same assessment -- the economy has continued to recover at a moderate pace, although the pickup appears to be pausing in part -- has been used.

Japan's economy contracted in the July-September quarter, for the first time in a year, but economists expect a rebound in the three months through December.

Private consumption is "picking up" and the recent rise in capital investment "appears to be pausing," the latest report said.

Consumer prices have been "rising moderately recently," the office said, changing its wording for the second straight month.

The global economy is "picking up despite weakness in some regions," the office said, using the same expression for the ninth straight month.

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