Tsutomu Watanabe, 04 April 2020

It has only been a month since the coronavirus shock emerged in Japan and its full nature is still unclear. This column compares the responses of consumption and prices to the COVID-19 shock and another large-scale natural disaster that hit Japan, the Tohoku earthquake in March 2011. The responses of supermarket sales and prices at a daily frequency during the two crises are quite similar. However, evidence suggests that whereas people expected higher inflation for goods and services in the wake of the earthquake, they expect lower inflation in response to the coronavirus shock, suggesting that the economic deterioration due to COVID-19 should be viewed as driven mainly by an adverse aggregate demand shock to face-to-face service industries such as hotels and leisure, transportation, and retail, rather than as driven by an aggregate supply shock.  

Lianming Zhu, Koji Ito, Eiichi Tomiura, 28 January 2017

We still know little about how firms alter their global sourcing patterns when facing uncertainty and shocks. This column uses Japanese firm-level data compiled after the Great East Japan earthquake of 2011 to show that firms in affected areas reacted immediately by offshoring more, but that this affect was significant only in the manufacturing sector. Policies to facilitate offshoring would support such emergency responses in future.

Hirofumi Uchida, Arito Ono, 11 February 2015

It seems like natural disasters should harm the economy by destroying lives and capital. This column investigates the extent to which disasters can lead to creative destruction through ‘natural selection’ of the fittest firms. Surprisingly, the rate of closure due to bankruptcy decreases – perhaps due to aid. Firm exits following the Tohoku earthquake were predominantly voluntary closures, with firms seizing the moment in order to leave an ageing market.

Kaoru Hosono, Daisuke Miyakawa, 13 August 2014

Natural disasters affect firm activities both directly and indirectly. One prominent indirect effect is on firms’ transaction partners, in particular – their banks. This column shows how damage to banks affects firm activities, such as capital investment and exports, using as a natural experiment Japan’s 1995 Kobe earthquake. Bank damage has a significant and negative impact on both firm investment and on exports but this effect does not last very long.

Yukiko Saito, 15 December 2013

Natural disasters severely disrupt supply chains. This article presents evidence from the Great East Japan Earthquake that the spillover effects on disaster-hit firms’ suppliers were worse than those on their customers. For those firms that shut down, however, the effects on their customers were worse, and were transmitted along the supply chain. Firms with partners inside the affected area were more likely to form new business relationships, but those whose partners shut down were not. This suggests disaster relief should be targeted to the hardest-hit firms.

Hubert Escaith, Robert Teh, Alexander Keck, Coleman Nee, 28 April 2011

The consequences of the tragic disaster in Japan are many. This column examines the trade effects. It suggests that Japanese exports will fall by 0.5–1.6% and its imports will rise by 0.4–1.3%. Despite the devastation in Japan, the effects on global trade will be relatively small.


CEPR Policy Research