How Japan's Banking Industry Responded to Great East Japan Earthquake

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Banking industry

Since Banking sector stock prices were one of the first which responded to the earthquake and Japan's financial system is also bank based (Allen & Gale, 2001), it is important to look, how Great East Japan Earthquake affected this sector. The Japanese banking industry has recovered well from the 2009 crisis to consistently post moderate growth. This trend is forecast to continue through to 2017. Japan is the second largest banking industry in Asia - Pacific, accounting for over 26% of the region’s total assets. The Japanese banking industry had total assets of $11,065.8bn in 2012, representing a compound annual growth rate (CAGR) of 2.1% between 2008 and 2012. (MarketLine, 2013)
The banking industry serves a wide range …show more content…

This is explained due to the fact that money supply increased, because people needed more cash on hand to pay for daily expenses. In order to
To meet the cash needs arising from people's lives and economic activity, the Bank supplies cash -- Bank of Japan notes and coins -- through financial institutions that hold current accounts at the Bank. Once a large-scale disaster occurs, withdrawals of cash by depositors tend to increase because of the need to have cash on hand to pay for daily expenses and heightened anxiety about the future. To prepare for such withdrawals, financial institutions obtain larger amounts of cash than usual from the Bank's Head Office in Tokyo and branches across the country to secure an ample supply of cash on hand. (Bank of Japan, 2011)
Because of the magnitude and extent of the damage caused by the Great East Japan Earthquake, financial institutions' requests to the Bank regarding cash supply reached a massive amount. The value of cash paid out by the Bank's branches and local offices in the Tohoku region in northeastern Japan during the first week after the earthquake totaled approximately 310 billion yen, about three times the amount in the same period of the previous year. On Friday, March 11, the Minister for Financial Services and the Governor of the Bank of Japan jointly issued a request for financial measures to assist areas affected by the Great East Japan Earthquake. (Bank of Japan, 2011)
The request was addressed to

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