Japan is located in an area where several tectonic plates meet. Earthquakes frequently strike the Japanese archipelago - minor tremors occur almost on a daily basis, while severe disasters - infrequently, yet they have had harsh consequences in terms of both direct and indirect impact on the economy, thus, on the financial system. Earthquakes are usually associated with devastation and losses, and Japan is no exception. However, Japan is still the third largest economy in the world measured by Gross Domestic Product (Ro, 2013).
The most disastrous earthquakes of the history in Japan of last 100 years took place in 1923, 1995 and 2011- the Great Kanto, the Kobe and the Great East Japan Earthquake (GEJE), respectively. According to Peter G. Zhang’s findings, The Great Kanto earthquake destroyed most of the Western Tokyo, which lead to an increase of inflation level amounting to 15 %, resulting from a serious shortage of goods in addition to an enormous government spending (Zhang, 1995). After the Kobe earthquake the Japanese economy slid into a long decline, except for the short period during which reconstruction spending provided a temporary boost (Hayashi, 2012). The Great East Japan Earthquake that hit the country roughly 3 years ago was the strongest quake ever recorded in Japan. Despite the fact that the post-disaster reconstruction phase cannot be considered to be over, the response to the quake is already widely debated.
The physical damage in the areas hit by the earthquake was enormous, but even though, the Japanese financial system, which is a critical infrastructure supporting people's lives and economic activity, consistently continu...
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...tabase Datastream. The extracted GDP data consists of quarterly gathered entries starting from 2006, quarter I to 2013, quarter III. The Nikkei 225 day-to-day values are extracted from January 2, 2006 until January 1, 2014.
The Nikkei 225 industry indices, calculated on a day-to-day basis, are exported from Datastream as well. The indexes are calculated with the same method as the main Nikkei 225 index, therefore no further adjustments are required.
Since the index is price-weighted, rather than value-weighted, the authors use the relative price change, rather than absolute change due to the difference in the size of each industry.
To compare the relative impact on the industries, the the following formula is used :
The acquired data will be organised with MS Excel and the statistical software STATA will be used for regression analysis.
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