Although a government panel nearly tripled its estimate for maximum economic damage from a Nankai Trough earthquake, the figure remains conservative because members did not want to scare companies and investors, sources said.
Although a government panel nearly tripled its estimate for maximum economic damage from a Nankai Trough earthquake, the figure remains conservative because members did not want to scare companies and investors, sources said.
In 2003, a different central government panel estimated economic damage from a Nankai Trough quake at a maximum 81 trillion yen ($855 billion).
But after the devastation on the northeastern coast caused by the Great East Japan Earthquake in March 2011, the government decided to review that estimate.
Last August, the panel predicted a death toll exceeding 320,000 from a Nankai Trough quake.
Although it did not release its revised economic damage estimate at that time, Yoshiaki Kawata, a professor specializing in disaster management at Kansai University who led the panel, offered a guess on what could be expected.
"The economic loss will likely reach a maximum of 900 trillion yen," he said.
On March 18, the panel released an estimate of 220 trillion yen in economic damage.
Unlike Kawata’s earlier prediction, the panel’s forecast did not take into account such factors as the effects of a nuclear plant accident or a volcanic eruption triggered by a huge quake in the Nankai Trough zone.
These factors were also excluded in the 2003 estimate.
Some members of the working group, including local government leaders and company executives, raised concerns that warning of such huge economic losses would prompt companies to abandon their disaster management measures and start moving facilities overseas, the sources said.
Concerns were also raised that a scary forecast would discourage foreign companies from investing in Japan, they said.
The initial plan was for the working group to release the economic forecast at the end of last year, but discussions were carried over into this year. The talks centered on damage to buildings and company facilities, much in the same manner in which the 2003 estimate was calculated.
Another working group greatly increased its estimates for the shocks of the expected quake and the subsequent tsunami. In the end, the economic damage prediction was nearly threefold the 2003 estimate, even without the estimated figures for possible damage arising from a nuclear accident or volcanic eruption.
Panel members said making such estimates would be too difficult.
"It was the result of a compromise made in considering the negative effects that might have resulted from the estimate while also taking into account the lessons learned from the 2011 disaster," a panel member said.
The estimated economic loss figure represents more than 40 percent of Japan's gross domestic product.
It includes a possible loss of 30.7 trillion yen in damage to plant and other facilities in Aichi Prefecture, which leads the nation in products shipped out by the manufacturing sector.
Toyota Motor Corp. runs many of its major production bases along the coastline facing Mikawa Bay, including the Lexus-producing Tahara plant, the automaker’s largest in Japan, as well as the Kinuura plant, which manufactures transmission parts.
Toyota is considering anti-disaster measures at its plants, such as moving generators to higher ground and raising the area where it keeps its completed vehicles before shipment.
As the Great East Japan Earthquake showed, an interruption in the supply of auto parts can be as crippling as actual damage to plants.
Toyota is known for its "just-in-time" production system that keeps parts inventories at assembly plants at a minimum. To prepare for earthquakes, the company has increased inventory of parts for which there are only a small number of suppliers, such as semiconductors.
However, even a huge company like Toyota cannot prepare for all possible damage from a quake and tsunami.
"All we can do is take realistic measures,” a Toyota executive said. "There are limits to what one company can do."
Preserving ports in disasters is also a key measure in maintaining the cross-border supply network of auto parts.
Nagoya Port is Japan’s leading port in terms of value of products exported. To mitigate damage in natural disasters, the coastal levee has been raised and steps have been implemented to reduce the risk of liquefaction.
According to the panel, Osaka Prefecture would suffer the second-highest amount of economic damage from a Nankai Trough quake, at 24 trillion yen.
Many of Panasonic Corp.’s major plants are located along the coast of Osaka Bay, including a flat-screen TV panel plant and a lithium ion battery plant.
The company began considering what measures to take against quakes and tsunami at each plant last year. Panasonic officials have also put together their own estimate of damage from a Nankai Trough quake and have begun looking for alternative production bases.
Some companies have already set up production bases abroad.
The Osaka steel works of Nippon Steel and Sumitomo Metal Corp. manufactures all domestic railcar wheels in Japan. That situation led a number of railway companies to ask the steel maker to diversify its production bases to prepare for an emergency.
Two years ago, the company acquired a U.S. manufacturer of railcar wheels and is planning to set up a production base there that will be able to produce the same products as those in Japan.
A Chubu Economic Federation survey asked companies what measures would be important in strengthening the parts supply network for manufacturers. The most popular response was the diversification of suppliers, including those overseas.
A federation official said such a move abroad could further hollow out Japan's manufacturing sector.
The central government also plans to compile a basic plan for strengthening facilities and systems to deal with a possible Nankai Trough quake.