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Macro Effects of massive Earthquake

The earthquake also caused a high tsunami which breached the safety of nuclear plants in Fukushima prefecture.What is worse, though, is it caused a partial meltdown, and now Japanese citizens not only suffered by damage of earthquake itself but also the dangerous level of radiation from the plants.On June 10th 2013, a Japanese National Police Agency announced there were 1 5,883 confirmed deaths, 6,145 injured, and 2,671 people missing, as well as 126,458 buildings totally collapsed, with a further 272,191 buildings ‘half collapsed’, and another 741,684 buildings partially damaged(“Countermeasures”).

This is the largest economic shock for the Japanese economy since the end of World War II.

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It may take some time before the full economic impact of the earthquake is known, but we can still look at the scale of earthquake economically by comparing it with the Great Hanshin-AwaJi Earthquake of 19951 in Japan and how it affected on the economy. Thesis: The Earthquake’s Impacts on Economic Flow and Stocks There are two important points to consider concerning the impact of this catastrophe: flow and stock. Flow is economic activities in everyday life, such as spending, production, income, and many other economic rowths.

Stock is a concept representing the abundance at some point in time, such as housing, factories, and social capital and so on. The flow of economic activities was damaged by the earthquake and tsunami. First of all, the earthquake and tsunami caused an impediment in physical economic activities such as production and consumption in the disaster area. Next, they cut off the distribution to the disaster area, and the connection between products and point of consumption was no longer smooth. Thirdly, it affected consumers psychologically.

Less people spent money for entertainment and leisure, and the economy xperienced a sharp downturn in consumption. At the time of the Great Hanshin- Awaji Earthquake, the consumption and production activities fell immediately after the earthquake, but the economy slowly recovered which is mentioned later at the Impact on Japanese Macro Economy. In comparison, the Great East Japan Earthquake and Tsunami is larger than the Great Hanshin-AwaJi Earthquake, and it caused nuclear power plant accident which caused serious radiation problem and the huge power outages.

It got goes worse and worse, and it will have a quite long effect on its economy. The earthquake and tsunami also caused a large loss of stocks. Stocks that about 102. 31 billion US dollars. This was equivalent to 0. 8% of the stock of the whole country. Compares to the Great East Japan earthquake and Tsunami, the loss amount is much greater than the scale of the Great Hanshin-AwaJi Earthquake. It caused crucial widespread damage on coastal areas in eastern Japan. Japan Cabinet Office estimated the loss was approximately 173 billion dollars, and it is still not completely determined yet (“Economic Basic Data”).

Impact on Japanese Macro Economy In response to the earthquake, Japan’s economy was confused; there was a sharp ecline of production activities, decline of exports, and self-restraint of consumption. Japanese macro economy recorded a big decline after the earthquake. The real GDP growth rate in first quarter of 2011 declined 0. 9%, and second quarter in 2011 for 0. 5% decrease. In the case of the Great Hanshin-AwaJi Earthquake of 1995, on the other hand, there was a slight increase of about 0. 009% in first quarter of 1995.

It was backed by strong yen, and the real GDP growth rate had an upward trend until first quarter of 1997. Even Hyogo Prefecture which was worst disaster area, showed a apid recovery as early as the second quarter of 1997. It is back up to 0. 04% growth (“Economic Basic Date”). If one takes the Japanese economic growth from 1995 into account, the Great East Japan Earthquake was worse than the Great Hanshin-AwaJi Earthquake. Antithesis However, there are some researchers who propose the positive effects from the disaster by economic points of view.

The Japanese Society of Psychiatry and Neurology published there is a decline in suicide in disaster area. In Yamagata- prefecture, one of large damaged area from the earthquake had recorded 43 ecreases on suicidal case in 2011. It recorded there were less than 300 cases of suicide in the prefecture since 1998(“The Decline in Northeastern Japan Suicide Rate after the Earthquake”). In addition, the Ministry of Health, Labour and Welfare also published that the rate of suicide is significantly decreasing nation-wide.

It decreased 1039 total suicide cases in 2011(“Suicide Measures”). It explained suicide rate is strongly linked to economic figures, and there was a Job increase in the waste disposal business and construction industry with the reconstruction budget injection. It will enhance the economy and thus leads to a decrease in the suicide rate. Furthermore, the earthquake had an effect on the aging population in Japan. To begin with, there was a high rate of elderly population in the area which had devastating damage by the earthquake and tsunami.

For instance, there were towns called Otsuchi and Yamada that had over 40% of the population was people over 60 years old, and 30% by elderly people (“Estimated Future Population of Japanese Municipalities”). Japan has a huge aging problem, and it is estimated that the elderly will make up one third of the Japanese population in 2030. A relatively large number of elderly people were victims of the disaster, and the decrease of the amount of the aging population ease aging problem although it will Just have effect a short term on its demographic figure overall (Kouno).

Synthesis Next, I will diagnose the macro-interaction to the earthquake with Japanese disaster mitigation policy. The Japanese government takes mitigation policies to recover the economic crisis caused by The Great East Japan Earthquake and Tsunami. First, they put large capital investment in its economy after the disaster. The Central Bank of ncluding quantitative easing and qualitative easing, which aims to break away from deflation. In addition, they claim there is no need to change the targeted inflation rate of 2%, which was the target set before the earthquake.

The Central Bank of Japan was also indicated that they will implement Open-End type2 for government bond and eliminate the three years restriction for payback period for its bond (“Four Major Policy”) Second, the Japanese government tries to break away from deflation and encourage weak yen. In order to stimulate the recovery of production and anufacturing, and to support active economic activity, Japan is resuming the nuclear power plant gradually with new enhanced safety standards.

This will be the basis for favorable production conditions in Japan. Japanese Prime minister Shinzo Abe takes a new policy of trade promotion and is trying to enhance the competitive position of Japan’s export-driven economy in international markets. A Weak yen is the direct way to enhance the export driven economy though Japanese trade is still in the difficult situation. There is a deterioration of the trade balance, and it has experienced decrease on current account surplus three months in a row.

However, because the government sent the clear message of weak yen to the market, Japanese yen becomes cheaper in the past three and a half years. They anticipate the improvement on export. Conclusion In conclusion, the Great East Japan Earthquake and Tsunami wreaked enormous damage on Japanese economy. Even though some positive effects were followed by the disaster as some researchers advocated, they have an insignificant effect on the economy because of its tremendous damages which is considered to be one of the top five largest earthquakes in the world.

Because it did not only inflict damages to ives and properties but also caused crucial damages to major nuclear plant stations, this is the most difficult crisis Japan has ever faced after World War II. From my perspective, Japanese government needs to have a more effective growth strategy to increase productivity since the workforce is decreasing. It needs to enhance efficient flow for workforce and capital. For instance, ease the regulation restriction for the workforce, and encourage the diversification on human resources. It is significant that government help to reform the active business activities for Japanese economy recovery.

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