Economic Impact of the Great East Japan Earthquake and Current Status of Recovery

April 27, 2011 Ministry of Economy, Trade and Industry

ARIGATO Thank you

Yomiuri Shimbun

"ARIGATO" is a word to express appreciation. The photograph shows the word "ARIGATO" which people affected by the Great East Japan Earthquake wrote on the shore using pine trees for the United States Armed Forces which had supported with the restoration of Sendai Airport. "ARIGATO" expresses the appreciation of the Japanese people for the support by each nation and their people, including the U.S.

Message from Prime Minister Naoto Kan regarding assistance received from overseas Tuesday, March 22, 2011 I would like to express my most sincere appreciation for the condolences and assistance Japan has received from approximately 130 countries, more than 30 international organizations, and people all around the world in response to the Tohoku-Pacific Ocean Earthquake. The rescue workers, search dogs, and nuclear power experts from various countries, as well as the human resources support from the U.S. Forces in Japan and others, assistance with food, medical supplies, blankets, and other supplies, and offers of assistance from over 670 NGOs and other organizations have all been profoundly uplifting to the Japanese people, who have come to realize acutely that a friend in need is a friend indeed. ... On behalf of the Japanese people, I would like once again to express my deepest appreciation upon having received this truly tremendous outpouring of cordial assistance from around the world. Naoto Kan Prime Minister of Japan

Contents
1. Extent of the affected areas 2. Reconstruction and recovery following the Hanshin-Awaji earthquake 3. Reconstruction and recovery following the recent earthquake (1) Tohoku Expressway (2) Railroads (3) Sea Ports (4) Airports 4. Electricity supply/demand 5. Present status and prospects of restoration of production bases in the affected areas 6. Effects on specific industries (1) Steel (2) Petrochemical (3) Auto and electronics 7. Effects of radioactivity from Fukushima Dai-ichi NPS (1) Distance between Tokyo and Fukushima Plant (2) Effects of radioactivity 8. Macroeconomic impact (1) Comparison with the Lehman Shock (2) Cabinet office estimate 3 4 5 6 7 8 9 10 11 12 13 14 15 17 18
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1. Extent of the affected areas

Adverse impact to Japanese economy is limited since the pacific ocean coast ,which suffered the greatest damage, accounts for only 2.5 % of the total Japanese economy. The affected areas are slightly smaller in economic size than that of the Great HanshinAwaji Earthquake(1995).
The extent of economic activity in the municipalities along the pacific ocean coast (Census of Manufactures)

Shipment value trillion yen All Japan Municipalities along Pacific Ocean Coast*
percent of total

Gross value added trillion yen

percent of total

335.6 100.0% 8.3 2.5%

110.8 100.0% 2.8 2.5%

Source Census of Manufactures 2008 (Ministry of Economy, Trade & Industry) * Municipalities along the pacific ocean coast in Aomori, Iwate, Miyagi, Fukushima and Ibaragi prefectures

The extent of economic activity in the municipalities affected by the Great Hanshin-Awaji Earthquake*Census of Manufactures

Shipment value trillion yen All Japan Damaged Municipalities*

In percent of total

Gross value added trillion yen

In percent of total

311.2 100.0% 8.3 2.7%

127.6 100.0% 3.7 2.9%

3

Source Census of Manufactures 1993 (Ministry of Economy, Trade & Industry) * 10 cities and 10 towns which Disaster Relief Act was applied to in Hyogo Prefecture.

2. Reconstruction and recovery following the Hanshin-Awaji Earthquake

Negative effects in the quake-hit area as well as nationwide were temporary with production levels showing a sharp recovery after dropping in the aftermath of the Great Hanshin-Awaji Earthquake.
Mining and manufacturing production before and after the Great Hanshin-Awaji Earthquake
110
(Dec.1994 = 100)

JanuaryHanshin-Awaji 17, 1995 Great Earthquake

Great Hanshin-Awaji Earthquake

100

AA month after the earth quake, Kinki month after the earthquake, Kinki Region to the previous Regionrecovered recovered to previous production levels production level

All Japan All Japan Kinki Region Kinki Region

90 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 96 7 8 9 10 11 12 94 95 Source Indices of Industrial Production (Ministry of Economy, Trade & Industry) Changes in Industrial Production (Kinki, Ministry of Economy, Trade & Industry)

3. Reconstruction and recovery following the recent earthquake : (1)Tohoku Expressway

The Tohoku Expressway is a transport and commercial artery which connects Tohoku and Kanto regions. Numerous factories are located along the route. 347 km out of 675 km of the expressway was destroyed in the earthquake on March 11, but traffic restriction was lifted on March 24th, following the completion of emergency restoration measures.

Tohoku Expressway

NEXCO East

Mar 12th

Mar 17th

NEXCO East

Mar 12th

NEXCO East

NEXCO East

Mar 21th

3. Reconstruction and recovery following the recent earthquake : (2) Railroads

None of the 26 trains operating at the time of the earthquake derailed, nor was there any serious damage to elevated bridges and stations, or collapse of tunnels. The entire Tohoku Shinkansen will have resumed operation by April 30th.
Scheduled resumption of operations as of April 18th

Morioka to Shin Aomori Resumed operation April 13th Ichinoseki to Morioka Resumed operation April 23th Sendai to Ichinoseki Around April 29th Fukushima to Sendai Resumed operation April 25th Nasushiobara to Fukushima Resumed operation April 12th
JR East

3. Reconstruction and recovery following the recent earthquake : (3) Sea Ports
Quays of all major ports in the quake-hit pacific coast from Aomori to Ibaraki became useable by May 24th. The ports damaged by the tsunami are gradually recovering function.

Hachinohe Kuji Miyako Kamaishi Ofunato Ishinomaki Quays of all the major ports became useable on March 24th

Sendai-Shiogama Soma Onahama

3. Reconstruction and recovery following the recent earthquake : (4) Airports

The reconstruction of Sendai Airport which was badly damaged by the tsunami showed surprisingly rapid progress thanks to the cooperation between the US Armed Forces and Japanese Self-Defense Forces. The entire runway was restored and became useable by March 28th. Passenger flights from Haneda-Sendai and Osaka(Itami)-Miyagi resumed operation on April 13th, a month after the earthquake.

Kyodo Kyodo

Sendai airport damaged by the tsunami as of March

13th.

The first landing at Sendai airport since the earthquake on April 13th.

4. Electricity supply/demand up to this summer

With reinforcement of the power supply, Tokyo Electric Power Company decided, in principle, to not carry out Rolling Blackouts. After March 29th, Rolling Blackouts have been discontinued. TEPCO forecasts that it will be able to supply electricity of up to 52,000 MW this summer. With TEPCOs action to reinforce further power supply, Rolling Blackouts will be discontinued all the way up to summer.
(Number)

5 4

Frequency of Rolling Blackouts

1 TEPCOs electricity supply capacity

MW

0
Mar 14th - Mar 21th - Mar 28th - Apr 4th 20th 27th Apr 3th 10th
Expected peak demand this summer 55,000MW

60000 55000 50000 45000 40000 35000 30000

Electricity supply before the recent earthquake

Apr 11th - Apr 18th - (period) 17th

As of April 15, TEPCO is able to supply electricity to 52,000MW of this summer. TEPCO plans to further increase power supply.

Mar 11th

Apr 21th

This summer

5. Present status and prospects for restoration of production bases in the affected areas
More than 60% of affected bases of respondents have already finished restoration. Meanwhile, other production bases are on the way to resumption, and about less than 30% are expected to be restored by summer.
(Reference) The ratio of the number of establishments located in the municipalities in 7 prefectures (Aomori, Iwate, Miyagi, Fukushima, Tochigi, and Chiba) covered by the Disaster Relief Act in the total number of the manufacturing establishments all over the country, is about 7%. (The figure was calculated based on Census of Manufactures 2008, as of March 27th)

64%

67% 58%

Present status and prospects of production bases in the affected areas

Whole manufacturing70 Material Industry46 Processing Industry24

38%
26% 17% 11% 9% 4%
Finished restoration

20% 13% 7%9% 4% 7%9% 4%

More than a year Not knowing

3% 2% 4%
By summer (1 -3 months later) 4-6 months later

3% 4%
6 months - 1 year

Within 1 month 1 month later 2 months later 3 months later

Affected areas : Aomori, Iwate, Miyagi, Fukushima, Ibaraki, Tochigi, Chiba

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6. Effects on specific industries (1) Steel

Although Sumitomo Metals Kashima plant has stopped production, other Japanese iron works can still produce plenty of crude steel.

Geographical locations of damaged iron works

Production capacity for crude steel (As of March, 2010)

in thousands of tons per year

Japan (total)

96,449

Sumitomo Metal Industries, Ltd

Kashima

6,821

Kashima accounts for approx. 7%

Kashima
0 20,000 40,000 60,000 80,000 100,000 120,000

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6. Effects on specific industries (2) Petrochemicals

Mitsubishi Chemicals Kashima Plant, which has suffered some damage from the Great East Japan Quake, is responsible for about 10% of Japans ethylene production. Even if it cannot be repaired soon, Japan has many other complexes which can produce more than the necessary volume of petrochemicals.
Production capacity for ethylene (As of December, 2009)
in thousands of tons per year
25.0
Location Kashima Goi Ichihara Chiba Anegasaki Sodegaura Kawasaki Yokkaichi Osaka Mizushima Fukuyama Shunan Ohita Company Capacity MITSUBISHI CHEMICAL CORP. 828 MARUZEN PETROCHEMICAL CO., LTD. 480 KEIYO ETHYLENE CO., LTD 690 MITSUI CHEMICALS, INC. 553 IDEMITSU KOSAN CO., LTD. 374 SUMITOMO CHEMICAL CO., LTD. 380 JX NIPPON OIL & ENERGY CORP. 404 TONEN CHEMICAL CORP. 491 TOSOH CORP. 493 MITSUI CHEMICALS, INC. 455 MITSUBISHI CHEMICAL CORP. 450 ASAHI KASEI CHEMICALS CORP. 443 IDEMITSU KOSAN CO., LTD. 623 SHOWA DENKO K. K. 615 Total Capacity 7279 Share 11.4% 6.6% 20.0 9.5% 7.6% 5.1% 15.0 5.2% 5.6% 6.7% 10.0 6.8% 6.3% 6.2% 5.0 6.1% 8.6% 8.4% 0.0 100.0%

Ratio of export &import to production of petrochemicals

23.1 21.2

13.1

Export

14.3

2.6

Import

2.9

0.5

0.7

Underlined plants shut their naphtha crackers after the quake.

ratio of export to production ratio of import to production

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6. Effects on specific Industries : (3) Auto / Electronics Industries

Several weeks after the earthquake, certain major factories producing core parts and materials temporally ceased operation, but gradually resumed . For factories that need more time to recover, companies are seeking substitute production from other factories. Most of the motor production companies have restarted production, depending on the supply level of core parts and materials.
Toyota Motor Nissan Honda Hitachi Automotive Systems All factories resumed production on April 18th. All factories, including a seismic-damaged engine factory in Iwaki-city, resumed production on April 18th. After production resumed of finished automobiles at the Saitama factory and Suzuka factory, all factories resumed production on April 11th. Sawa and Fukushima Auto-parts manufacturing factories damaged in the earthquake partially resumed production on March 25th. Manufacturing facilities have been almost completely repaired. Headquarter factory damaged in the earthquake at Hitachinaka-city resumed production of Lithium-ion batteries from March 28th. Factory damaged in the earthquake partially resumed manufacturing of turbines for electricity power plants on March 29th. 90% production level has recovered. 6 of 7 factories damaged in the earthquake have already resumed production. All the stakeholders concerned are making every effort to restart the operation of the NAKA Factory as soon as possible. Originally they announced before July, now try to accelerate the schedule. Shirakawa Factory damaged in the earthquake resumed production by the end of April. Right now, substituting production with other group factories. Soma Factory damaged in the earthquake which produces engines and gas turbines, resumed operation on March 29th. 13

Hitachi Vehicle Energy Hitachi ltd. Renesas Electronics

Shinetsu Chemicals

7. Effects of radioactivity from Fukushima Dai-ichi NPS

Distance between Tokyo and Fukushima Dai-ichi NPA is 230km (about 144 miles) .
Tokyo - Fukushima Dai-ichi NPS : 230 km (about 144 miles)

Amsterdam - Brussels : 170 km (about 106 miles)

Paris - Brussels : 266 km (about 166 miles) NY - Philadelphia : 137 km (about 86 miles) Los Angeles San Diego : 180 km (about 113 miles) Washington DC - Philadelphia : 200 km (about 125 miles)

20km from Fukushima 1 Fukushima Prefecture

230 Km (about 144 miles)

Tokyo

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7. Effects of radioactivity from Fukushima Dai-ichi NPS

The recent environmental radioactivity level in Tokyo is lower than the level in New York and Hong Kong. Several UN agencies, including the WHO, have announced that radioactive materials have been of low concentrations and do not present health or transportation safety risks.

International organizations press release International Civil Aviation Organization April 11, 2011 Continuous monitoring around these airports confirms that radiation levels are well within safe limits from a health perspective.

Environmental radioactivity levels around the world

Hong Kong 0.14 Sv/hour New York 0.095 Sv/hour Tokyo 0.078 Sv/hour
Source Ministry of Education, Culture, Sports, Science and Technology MEXT, Hong Kong Observatory, Live radioactivity monitoring online USA Hong Kong(as of13 April , 2011, New York (7 days average to April 13, 2011) Tokyo (as of 12 April, 2011

World Health Organization April 5, 2011, FAQs

WHO is not advising general restrictions on travel to Japan.

Environmental radioactivity level in Tokyo The environmental radioactivity level in Tokyo, if the current level continues for three months, will be 168.5 Sv*.
* 0.078 SV/hr (as April 12th, 201124hour90days=168.5SV Radiation in daily life An air trip between Tokyo and New York RT): 200 Sv A gastrointestinal X-ray examination600 Sv 15

Article by Bloomberg
April 1st, 2011(Bloomberg) -- Hong Kong, Cornwall Radiation Beats Tokyo even after Japan Nuclear Crisis
Typical amounts of radiation in Hong Kong exceed those in Tokyo even as workers struggle to contain a crippled nuclear plant in northern Japan, indicating concerns about spreading contamination may be overblown. The radiation level in central Tokyo reached a high of 0.109 microsieverts per hour in Shinjuku Ward yesterday, data from the Tokyo Metropolitan Institute of Public Health show. That compares with 0.14 microsieverts in the Kowloon district of Hong Kong, the Hong Kong Observatory said on its website. A person is exposed to 50 microsieverts from a typical x-ray. Tokyos radiation level is only slightly higher than New York, where an average of 0.095 microsieverts an hour was recorded in the seven days to yesterday, according to a real- time Geiger counter reading set up as part of the Background Radiation Survey, a project where owners of the equipment feed their readings into a central database. The level in Tokyo the day before the accident averaged 0.0338 microsieverts an hour.
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8. Macroeconomic impact : (1) Comparison with the Lehman Shock

According to private sector forecasts, Japans economy will grow in Q3 and Q4 2011 after slowing down in the Q1 and Q2. The degree of the slowdown is expected to be much less than after the Lehman Shock.
15.0
10.0

Comparison with Lehman Shock

Real GDP : Changes from the previous quarter, annual rate
Actual Forecasts by private sector

6.0
5.0 0.0 5.0 10.0 15.0 20.0
25.0

March 11, 2011 Tohoku-Pacific Ocean Earthquake occured

10.7
2.3

7.2
5.8 5.5

2.0 1.2 -3.3

September 15, 2008 Bankruptcy of Lehman Brothers

3.3 -5

0.1

-1.5

0.0

-1.3

-1.4
-3.9

-1.9

-11

actual average of upper 6 agencies' forecasts actual (before & after Lehman shock) average of bottom 5 agencies' forecasts

-20

CY2011

CY2010 CY2008

CY2009

Source "National Accounts" Cabinet Office "The Nikkei" April 5, 2011

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8. Macroeconomic impact : (2) Cabinet office estimate

The Cabinet Office forecasts that Japans growth will be positive following the Great East Japan Earthquake. It estimates damage to stock due to the disaster to be about 1% of the national stock.
Real GDPtrillion yen FY2011(2011,42012,3) First half Impact on GDP in the affected areas
Decline in production due to damage to private plants & equipment

Second half

FY2012 (2012,42013,3)

FY2013 (2013,42014,3)

Impact on GDP in the non-affected areas via supply-chain connections

Impact on recovery of damaged stocks (assuming a scenario where recovery takes 3 years)
Increase in production corresponding to the gross fixed capital formation

Total impact on GDP In percent of real GDP (annualized) Damage to stocks (Social Capital, Housing, private plants & equipment)
Source Cabinet Office

trillion yen about 1% of all stock

() Prefectures covered : Hokkaido, Aomori, Iwate, Miyagi, Fukushima, Ibaraki, and Chiba. Period covered FY2011 FY2013 This table shows the difference from a baseline which corresponds to real GDP that would have realized if the Tohoku-Pacific Ocean Earthquake had not occurred. When calculating the ratio to real GDP, estimated real GDP for FY2010 as shown in the government economic outlook (Cabinet decision in January 2011) is used. Total stock in Japan is 2,054 trillion yen. by macroeconomic and fiscal model database 2009 Expected impact on GDP via constraint on electric power supply.

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