Japan’s natural disaster will at most shave 1%-2% off GDP before public spending and reconstruction give the economy a kick-start, according to Martin Currie portfolio manager John-Paul Temperley.

Temperley, who co-manages the Martin Currie Japan Absolute Return Fund, said the area where the main force of the earthquake and subsequent tsunami occurred accounted for around 8% of Japan's total GDP.

"Although in terms of the human tragedy it is huge, the long-term economic impact will be fairly slight after an initial period where the extent of the disruption to production, communications and transport will be quite large," he said.

"We estimated, using various models from previous examples like the Kobe earthquake 16 years ago, that something in the region of 1%-1.5% annualised GDP impact could be felt. But it is likely to be very front loaded in this current quarter and probably into the second quarter," continued Temperley.

After that he said the "positive impact from reconstruction and reinvestment in the economy in the afflicted areas should on a longer-term basis mitigate that short-term blip."

He pointed out that the impact of the global financial crisis following the collapse of Lehman Brothers had a far greater effect on Japan.

In an interview with Hedge Funds Review, Temperley gives his views on the short-term economic outlook and the effect power cuts will have on the country as well as Japan's long-term dependence on nuclear energy.

He explains how he is protecting his own fund. In addition he talks about how he is addressing concerns of investors in the Japan fund during this volatile time.

The performance of Martin Currie Japan hedge fund for March month to date is down 1.5%. For 2011 year to date the fund is up 1%, according to unaudited numbers. The equity long/short strategy, which includes the fund and several managed accounts, has assets under management of around $350 million. Martin Currie launched the Japan fund in July 2000 and a Ucits-compliant version in September 2010. The fund is co-managed by Keith Donaldson and Temperley.