The Great East Japan Earthquake's Impact on the Japanese Financial System

The three-year SAIC stock price data and its corresponding SSE index are obtained from finance.yahoo.com, as it provides dividend-adjusted closing prices. The two data are ordered in time in Excel (Sort Ascending). It is found that 46 SAIC daily stock prices are missing due to suspension of trading, therefore; 46 corresponding SSE daily index are removed in order to match up dates on the two data series.

Page 3: Introduction to the Financial System Page 7: Commercial Banks Page 12: The Share Market and the Corporation Page 15: Corporations Issuing Equity into the Share Market Page 19: Investors in the Share Market Page 24: Short-term Debt Page 28: Medium- to Long-term Debt Page 32: Interest Rate Determination and Forecasting Page 37: The Foreign Exchange Market Page 40: Factors that Influence the Exchange Rate Page 42: Futures Contracts and Forward Rate Agreements Page 47: Options

This paper identifies and analyzes the major issues and consequences which the most recent earthquake in Japan brought to the business community. It presents some courses of actions and their justifications on how the company should proceed in its industry in order to eliminate or at least minimize the negative impacts of this earthquake on its normal business operations.

On Friday March 11th, 2011 at 2:46 pm, the fifth largest earthquake recorded since 1900 with a magnitude of 9.0, 1.7 Richter scale points greater than the devastating Vancouver Island earthquake of 1946, struck the coast of Japan, 231 miles northeast of Tokyo1, causing a devastating regional and global catastrophe.

Natural disasters are a huge challenge for the planet because of the adverse effects that are associated with them. One of the major earthquakes to have shaken the earth is the Great Sendai Earthquake or Great Tōhoku Earthquake that occurred in 2011. The event started when a powerful earthquake hit the northeastern Japan on March 11, 2011, and resulted in a widespread damage on land. A series of massive tsunamis later devastated many parts of the coastal regions of the country with the worst affected being the Tohoku region. The tsunami further resulted in a major nuclear accident that damaged distant regions on a power station located along the coast. The economic effects of the tsunami qualify it as one of the major natural disasters because it affected Japan’s economic stability as the country ended up resorting to importing as an alternative to cover the loss.

Since the Second World War, the Japanese economy had experienced remarkable growth, transforming from a developing to an advanced developed economy in a single generation. However, on the edge of a three-decade long “Economic Miracle,” in the late 1980s, Japan faced its regrettable “bubble economy” in which asset prices rapidly soared, money supply and credit underwent sizable increase, and economic activity overheated for a prolonged period (Okina p.396). At the bubble’s peak in 1989, the Japanese stock market obtained a value of around $4 trillion, reaching the benchmark Nikkei 225 stock average of ¥38,915 (four times the level they had been in 1983) (Siebert p.9). This was approximately 44 percent of the world’s equity market capitalization (Stone p.149). At around similar time frame, Japan also saw a spectacular surge in land prices with the land values five times that of the United States (Stone p.149). Hence, during this time, the economy relished an investment and consumption boom to the extent that Japan rapidly became known as the world’s largest creditor country. However, such record growth fell drastically with the burst of the bubble: the stock market plummeted by over 60 percent from its peak in 1989 to 1992 while speculative land prices fell over 50 percent and essential land prices declined by about 15 to 20 percent (Okina p.397). Overall, the bursting of the bubble resulted in a detrimental decline in asset prices, the accumulation of enormous

On Friday at 2:46 p.m. local time, near the northeast coast of Japan, there was a magnitude of 9.0 disastrous earthquake occurred on March 11, 2011 (“Poster of the Great Tohoku Earthquake”, 2012). Earthquakes occur at fault when a fracture in the earth along which movement occurs. When strain builds up, the fault slips and earthquake is created. Earthquake, the most destructive natural disasters of all is caused by the movement of the tectonic plates in the lithosphere. The ground shaking is produced by a rapid released of energy and stress in the Earth. When the stress is release, it sends vibrations known as seismic waves that produced at the focus of the earthquake. Honshu earthquake is considered as one of the deadliest earthquakes and

On March 11, 2011, a 9.0 earthquake shook northeastern Japan. The earthquake was felt around the globe. Debris that was washed away still continues to wash up on the beaches of California and other beaches in the US. The residents of this small island are still recovering from this natural disaster. As a result of the earthquake, 19,000 lives were lost and 1.2 buildings were damaged. The earthquake/tsunami cost Japan $574 billion. To make matters worse, the waves of the tsunami damaged a nuclear power plant located in Japan and caused the radioactive material to leak out into the surrounding area.

An earthquake shook northeastern japan on March 11, 2011. It was a magnitude -9 earthquake so it caused a savage tsunami. The great earthquake was felt around the world from the antarctica's ice sheet and norway’s fjords. Even years later things are getting washed up on north America s beaches. 250 miles of japan’s coastline Honshu dropped almost 2 feet . The jolt moved 8 feet of Honshu eastward. The tsunami broke icebergs in parts of Antarctica such as Sulzberger ice shelves.

Japan ranks as the third largest economy in the world as of 2010. The GDP at current prices in US dollars in Japan was reported at 5068.06 billion in 2009, according to the International Monetary Fund (IMF). Japan’s resurgence after World War II has however reached an inflection point in yearly 1989 after the burst of Japan’s asset price and real estate bubbles. As can be seen from the graph below, Japan’s GDP has hovered around the same level through more than 20 years of economic stagnation. The GDP’s slow growth has been exacerbated by the world financial crisis of 2008. A major landmark of Japan’s stagnation has been the BOJ’s fight against deflation.

Earthquakes have definitely affected Japanese life. The most major earthquakes in Japanese history have taken a heavy toll of human lives and property. To prevent some of the damage, scientists have been trying to predict the occurrence of earthquakes

The deregulation of financial markets catalysed by Globalisation worldwide has impacted on the amount of trade within the Japanese economy beneficially allowing easier access to foreign currencies, facilitating a higher flow of goods between nation, by relaxing laws that severely prevented foreign buying of currency, and floating the yen. These drivers have helped boost Japan's trade and recovery from its recession. Technology has allowed finances to be traded and communication to be near to instantaneous. This has increased dramatically the amount of FDI into Japan largely thanks to the numerous strategies the Japanese government has taken to promote economic growth and hence development. Finance and Foreign Direct Investment (FDI) have increased as a direct result of globalisation doubling from $63 billion in 2001 to $144 billion in

Author Hubert et al. (2011) examined the Tohoku earthquake and tsunami in Japan. In the results, Japan was impacted on both imports and exports by the Tohoku earthquake and tsunami. However, the impact on international trade mostly remained small. Also, another author Meng et al. (2015) studied the impact of natural disaster in China and

Currently share market is well known to all. It is known that the economic stability and prosperity of a country depend on the condition of her share market. Many brokerage houses are now operating in our country to help investors. When Bangladesh economy looks like a good shape based on capital/share market, that time Trading on the Dhaka Stock Exchange index was halted after it fell by 660 points, or 9.25%, in less than an hour. Chittagong Stock Market also met a similar fate. An abrupt crash of the market sparked violent protests from the Bangladeshi investors. It was the biggest one-day fall in its 55-year history. It is estimated that over three million people - many of them small-scale individual investors - have lost

As indicated by the case study S&P 500 index was use as a measure of the total return for the stock market. Our standard deviation of the total return was used as a one measure of the risk of an individual stock. Also betas for individual stocks are determined by simple linear regression. The variables were: total return for the stock as the dependent variable and independent variable is the total return for the stock. Since the descriptive statistics were a lot, only the necessary data was selected (below table.)