RIETI - The Great East Japan Earthquake and Manufacturing Production Recovery

This paper analyzes the impact of the Great East Japan Earthquake on manufacturing sector output volatility and the determinants of establishment recovery by using monthly establishment-level data (Current Survey of Production), and yearly firm-level data (Basic Survey of Japanese Business Structure and Activities). The main findings from our research are twofold. First, the impacts caused by the Great East Japan Earthquake on the output volatilities is bigger in the automotive industry, but smaller in the semiconductor industry compared with those caused by the global financial shock in 2008. Second, establishments with a larger number of employees, higher labor productivity, and belong to headquarters with a large number of employees, and higher liquidity experienced a rapid recovery in their level of output. On the other hand, the recovery of establishments that are small-scale and located in the disaster affected areas has been delayed. These results imply that in order to minimize the damage to the economy caused by natural disasters, support measures are necessary not only for the physically damaged establishments, but also for small scale establishments which have higher vulnerability to supply chains disruptions. However, we must be cautious in drawing a general policy implication from our analysis using the limited data.