Knowledge Notes, Cluster 6: The economics of disaster risk, risk management, and risk financing
In 2011 the GEJE contributed to a 0.7 percent contraction of Japan’s GDP. But the full extent of GEJE’s economic impacts will not be known for some time. Manufacturing and services suffered significant direct and indirect impacts. Direct damage to buildings has been estimated at approximately ¥10.4 trillion, or 62 percent of total damages. The amount of damage to the capital stock (asset base) of agriculture, forestry and fisheries is estimated as ¥2.34 trillion, while damage to the tourism industry amounts to approximately ¥0.7 trillion.
Although the Tohoku and Kanto regions were the most directly affected by the earthquake, the entire manufacturing sector in Japan and some industries abroad were forced to suspend production, as the impact of supply-chain disruptions triggered by the disaster spread through the globe’s networked production system. A dense network of supply chains runs throughout Japan, enabling manufacturers to engage in highly efficient production while keeping inventory to a minimum. But this efficiency-oriented management of supply networks backfired in the wake of the earthquake. Although Japanese companies were remarkably responsive, restoring supply chains and getting production almost back to normal by the end of summer 2011, the need still remains to create more resilient supply chains both in and outside Japan.
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