By Sophie Xu, Amy Shen and Liwen Zhang
On March 11, 2011, Japan suffered a magnitude 9.1 earthquake on the Northeast coast of Japan. When unprepared, extreme weather events can significantly disrupt supply chains, resulting in delays and site shutdowns, requiring time, labor, and capital to recover from. Most notably, the 2011 Japan Earthquake and Tsunami disabled three nuclear reactors and left 18,000 people dead. In this article, we will evaluate Japan's 2011 imports against data from 2010 and 2012. Additionally, we will incorporate Germany's imports from 2010 to 2012 to provide a comparative context and better understand the broader impact of the event on international trade patterns.
Japan’s Imports to the United States from 2010-2012
The 2011 Japan Earthquake and Tsunami caused extensive disruptions to production facilities, infrastructure, and power grids. Disruption in manufacturing can trickle down to other parts of supply chains, including transportation and logistics. We used the annual total weights of commodities to analyze the impact of these events on supply chains without nominal factors such as inflation and currency. Using the United States Census Bureau’s Japan imports to the United States through the Vessel SWT (kg), which is the shipping weight of trade going through vessel seaborne trade ports, the Air SWT and Containerized Vessel SWT, we identified the largest commodities imported to the United States provided below. Across all three years for Vessel SWT, 8708 Motor Cars and vehicles for Transporting Persons were Japan’s highest commodity imported into the United States. For Air SWT and Containerized Vessel SWT, 8708 Parts & Access for Motor Vehicles was Japan’s highest commodity imported into the United States. The findings were unsurprising, considering that Japanese brands, such as Toyota, Honda, and Nissan, are consistently top selling internationally, particularly in the United States.
An important observation is the differences in Japan’s exports from 2010 to 2012. In 2010, the United States imported 2.4 million kilograms of Motor Cars and vehicles for Transporting Persons through Vessel SWT. In 2011, Japan continued this trend by exporting 2.4 million kilograms of Motor Cars and vehicles for Transporting Persons through Vessel SWT. However, in 2012, this number increased to 3 million kilograms. This 600,000-kilogram difference is substantial and can insinuate that Japan was forecasted to increase exports to the United States more than the actual annual amount. It is also possible that Japan was able to rebuild and improve its supply chains after the earthquake, as evidenced by the significant growth observed in 2012. For the subsequent actions, it would be favorable to determine if the differences between Japan’s exports from 2010 to 2012 are noteworthy. Further information and context regarding the functionality and productivity of Japan’s top suppliers and manufacturers are necessary to understand the stagnant number in 2011.
Source: US Census Bureau
Source: US Census Bureau
Source: US Census Bureau
Comparison of Germany and Japan’s Imports to the USA
To achieve this, we designated motor car imports from Japan as the treatment group and those from Germany as the control group. Over the past two decades, Germany has consistently held the position of the top exporter of motor vehicles, with Japan ranking as the second largest. Due to the prominence of these two nations in the motor vehicle export market, we made this choice. According to OICA (2018), In 2011, Japan manufactured around 8.4 million cars and commercial vehicles, revealing a 12.8% decrease from 2010. To assess the earthquake's impact on Japan and its supply chain, we compared this data with Germany's imports in 2010 and 2011.
During weeks 15-25, the average shipment weight in Germany remained stable, indicating a resilient supply chain. In contrast, Japan experienced a significant drop in average shipment rates during the same period, gradually recovering and aligning with Germany's rates around week 26. This comparison illuminates the distinct effects of the earthquake on the supply chains of Japan and Germany in the specified time frame.
Source: oica.net
Japan 2011 Earthquake and Tsunami Global Impact
The Great East Japan Earthquake of 2011 significantly impacted its economy, leading to a 0.47 percentage point decline in real GDP growth in Japan following the disaster. GDP growth in the most affected regions fell by 2.2 percentage points in 2011 compared with the previous year. Nevertheless, the earthquake's impact was far-reaching. Growth declined by 3.8 percentage points for companies whose suppliers were affected and by 3.1 percentage points for companies whose customers were affected.
Moreover, the impact on the supply chain is not limited to this; many firms suffered indirect economic losses, such as the bankruptcy of a partner of a firm, the disruption of a supplier's source of supply, and so on, with the former experiencing a drop in sales growth of 2.8 percentage points and the latter a drop in sales growth of 2.1 percentage points. By way of comparison, we find that these figures illustrate the interdependencies in global supply chains and emphasize the butterfly reaction that can be caused by disasters in a single region, culminating in unimaginable economic losses, as vividly illustrated by the 2011 earthquake, which caused enormous damage to Japan's supply chains and real GDP as a result of the earthquake and tsunami.
Source: FRED
This event highlights the quick recovery Japan was able to make. In the chart above, which compares inflation-adjusted GDP for the United States and Japan from 2010 to 2023, we observe that Japan's GDP index declined around the time of the earthquake. However, by 2012, it had not only recovered from the drop but also surpassed the index recorded in 2010, continuing an upward trajectory.
In an interview, Takeuchi attributed the ability of many companies and suppliers in Japan to thrive after the environmental crisis to the country's culture. This culture, characterized by immediate actions toward rebuilding infrastructure, relocating citizens, and accepting international support, is driven by a commitment to serving the community and striving for the common good, despite the economic losses experienced by many. Instead of focusing on reacting to economic losses by cutting costs, companies invested in their people, boosting productivity and morale across the country.
In conclusion, the exploration of the aftermath of the 2011 Great East Japan Earthquake provides valuable insights into the resilience and adaptability of supply chains in the face of extreme weather events. The study not only sheds light on Japan's remarkable recovery but also underscores the broader implications for global supply chains. The interconnectedness revealed in this analysis emphasizes the importance of understanding and mitigating the impacts of extreme weather on supply chains. By learning from Japan's experience, businesses and nations can proactively strengthen their supply chain resilience and navigate the challenges posed by such events, fostering a more sustainable and robust global economic landscape.
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