Japan Earthquake and Tsunami situation summary - 4

Logistics and Impact on Economy

The initial shocks destroyed some bridges, roadways, and railways, halting the distribution network of the Tohoku Region including Sendai, a city of one million people. The coastal communities north of Sendai are separated from the population centers along the spine of flat land in the middle of Honshu Island with mountains, and, thus, were rather difficult to reach even before March 11th. Then the destruction of accesses made the logistics an acute problem in the coastal region, where relief materials were needed the most.
The quakes and tsunamis also put more than a handful of oil refineries along the Pacific coast out of business, at least initially. This threw the fuel (heating oil as well as gasoline) distribution off balance in the eastern half of Japan including the Tokyo region.
These compounded problems made the logistics of rescue and relief activities very difficult. (See more on this below.)
The Tohoku Region also has many advanced technology manufacturing plants. With the physical damage and/or the disruption of transportation, many plants were forced to close down. Since many manufacturers had adopted Toyota’s just-in-time delivery tactics for parts and half-products, once a plant stops production in upstream of the supply chain, the whole line of factories, even if they were located outside the earthquake affected region, had to be shut down with very few parts in stock. There is already a report of temporary workers laid off at a factory in Shimane, at the western end of Honshu, because of the stoppage of their suppliers in Tohoku.
Many fishermen lost their boats and nets in tsunamis. The Pacific Coast of Tohoku boasted numerous large fishing bases. We will have to wait and see how much impact this will have on our dietary needs.
The nuclear scare has prompted many foreign businesses to at least temporarily flee Tokyo or the country altogether. They seem to be coming back to Tokyo as they realize that it had been an overreaction. However, as the problems at Fukushima Daiichi linger, there will be a serious economic consequence in the region. At least the communities within the 30km (19 miles) radius are vacated with no end in sight. There will be thousands of jobless people from those communities at least. As they relocate to other communities, they become competition for jobs when already the recession has squeezed the job market throughout the country.
The shortage of electric power is worrisome because it disrupts manufacturing activities in many ways. The planned blackouts are marginally necessary now, but when the summer heat arrives, the power demand will soar with air conditioning. Industries are already talking about ways to reduce the peak demand by shifting the operation to night time, assigning specific days off to individual businesses instead of everyone taking the weekend off, etc. Japan adopted the policy called “Cool Biz” a while ago to encourage business people to take the tie and jacket off during the summer months and set the air conditioning at a higher temperature. I can imagine that Japanese businesses will become even more casual this summer.
The amount of damage in both private and public sectors will be enormous. At the time of Kobe Earthquake, the damage was estimated to be approximately 2.5% of GDP. This time, it will certainly be more. So, for a year or so, the overall economic output may be down. But the rebuilding work will eventually push the economy up a little. And since this emergency will likely convince the current government to give up on some notorious campaign promises, such as child subsidy, free high-school tuition, and rice buy-up for farmers, all designed to please local constituencies in support of the Democrats, but little economic stimulus value, the governing principal may shift to more pro-business, which we need to pay for the rebuilding as well as to compensate for the shrinking and aging demography. Some intellectuals have already started speaking up about this disaster being a wake-up call, a great opportunity to put an end to the doldrums, and push reform in our societal problems such as the pension system, healthcare, centralized control by bureaucracy, high corporate taxes, rigid employment practices, uncompetitive education, etc. (See more in “What is to Come” below.)

Life in Tokyo and Elsewhere

1) Dress rehearsal for the Big One for Tokyo
In a sense Tokyo is arguably better prepared for a large earthquake than any other regions in Japan for an obvious reason. It is on flat terrain; no landslide. It is somewhat protected by the closed geometry of Tokyo Bay against onslaught of tsunami; some coastal inundation may occur, but the destructive force may be reduced. Recently built large buildings follow strict seismic building code; we really, really, do not believe that they could collapse. All nuclear power plants are located far from the city. Only issues I personally worry about are the raised highways, which were built quickly for the Tokyo Olympic Games in 1964, which may collapse in sections, and envelopes of smaller buildings that might fall off due to differential movement.
Government agencies had predicted that in case of a big earthquake on a weekday, the central districts of Tokyo would be paralyzed with people hurrying home, streets filled with people as if they were in rush-hour trains, while all the public transportation network would be suspended. Agencies recommend that workers remain at work and delay their attempt to get home as much as they can. Here is a collection of anecdotes of what happened in Tokyo on March 11th.
• Most businesses closed and let workers out. Some people walked hours to get home.
• Supermarkets and convenient stores (convinis for short) quickly sold out beverages, snacks, bento boxes (take-out meals). Fast food restaurants were all crowded until dawn; some ran out of food items, but let people stay.
• Sports equipment stores had brisk sales as people bought up sneakers and bicycles.
• Japan Railway train network (JR – formerly of national train system) was down from the time of the first earthquake on till next day. The subway systems came back up towards early evening, but, in order to maintain safety of passengers within the stations, they had to limit the number of people entering stations at a time.
• Government facilities (municipal offices, auditoria, schools) were open to those who needed shelters for the evening.
• Private schools, temples and shrines also opened their buildings, and some provided free water and food.
• Private homes also helped passers-by by giving access to well water, and distributing rice balls.
• Most people wanted to go home because they could not confirm the safety of their family members. Others were worried about old parents or young children at home.
• Mobile phone communication was restricted by providers. Land lines were difficult to get through. Twitter and SNS services through internet provided many with live information (subway line status, shelter information, etc.)
2) Mood in the Streets / Anxiety at Home
After one week or so, Tokyo was still quieter than usual; weekdays looked like weekend. As the magnitude of the casualty in Tohoku Region became clear, people were in a sober mood. Even if they did not have any family members or acquaintances directly affected by the earthquakes and tsunamis, they were and are still in a collective mourning period, it seems. My wife and I were basically glued to TV all day long, which had, for a week or so, continuous coverage of all things related to March 11th. We would be jolted by occasional emergency earthquake warnings on TV, which warn the arrival of an aftershock within 10-15 seconds. Most festivities were cancelled, including, unfortunately many commencement exercises of schools and universities. (Japanese school year is from April to March.) (In fact, the first reported death in Tokyo was at an old government-owned auditorium in downtown Tokyo where the ceiling panels fell onto a group of teachers and students attending their graduation ceremony.)
3) Foreigners and Kids Exodus – The Panic Stricken Left the Town
This is quite unfortunate, but understandable; many foreign nationals left Japan or Tokyo in panic and/or by instructions of their consulates or companies. There was a rush in the first week of foreigners getting out. Most were scared of radiation; though some had an excuse of business interruption by power blackouts, or unpredictability thereof. Some European airlines diverted Narita (Tokyo) routes to Kansai (Osaka). Most of them have come back to Narita this week, but they still stop in Seoul or Taipei or Shanghai so that their crew does not have to stay over in Tokyo, nor their planes reload drinking water at Narita. I suppose the Japanese would do and probably did the same when, for example, SARS scare kept people away from Hong Kong and some other Southeast Asian countries a few years ago. But Japanese consumers may have a little negative impression of companies like some luxury as well as fast fashion brands who closed their stores and moved the headquarters to Osaka.
Mothers of young kids were also scared of radiation – especially of radioisotope of iodine (iodine 131), which tends to accumulate in the thyroid gland causing cancer in young children under ten. So far, the amount of iodine-131 found in atmosphere, water, and some food products in Tokyo is so miniscule it cannot have any lasting effect. Its half-life of 8 days also makes it relatively safe as long as one is not exposed to it for a prolonged period of time. However, mothers who “do not want to take risk”, or who do not believe in the government releases of daily iodine-131 levels took their children to western parts of the country or even farther away. Of my son’s grade school class, about one third of the pupils have been missing since Monday after the earthquakes. I would question the validity of this action considering the risk of traffic accidents, stress of living out of suitcase for a prolonged period of time, and detrimental effects of being out of school and out of touch with friends from school.  (The thyroid gland cancer epidemic in pre-teens around Chernobyl was due to their internal radiation exposure through prolonged intake of contaminated milk, which kept constant replenishment of iodine 131 to unsuspecting children.)
In any case, the government is not doing enough to educate the public, nor convey accurate information daily to foreign media. The way they are handling the communication and public relations is so unprofessional that it only augments the mistrust of the authorities and suspicion that they are hiding something. In a case like this, quick, timely, and apt announcements must be released by authorities in order to avoid panic, sensationalistic public speculation, and eventually, unnecessary costs in lost businesses, in addition to preventing secondary loss of life and physical, monetary, and social damage to public and private properties.
4) Planned Power Blackouts
Because of power shortage as a result of several power plants, fuel-burning as well as nuclear, going off line, TEPCO instituted planned blackouts, which initially caused much confusion especially for train services. TEPCO did not coordinate with the train lines so train companies did not really know when to operate which lines and the “planned” part is not that well planned, making it more unpredictable. Now people are somewhat used to it, but problems do happen;
• Traffic accidents at crossing with traffic lights not working, and the victims not being able to receive necessary CT scan, for example.
• Fire and carbon monoxide death resulting from the use of barbecue grills for heating within residences.
• Blood drives not being able to accept good wills of those who want to help.
• Hospitals not being able to plan major surgeries, as small hospitals may have emergency power generators, which would last only a few hours, and now they face diesel fuel shortage, too.
• Some factories and shops require a continuous line operation. Disruption of such lines may mean a lower product quality. In many cases, a planned blackout of 3 hours does not mean 3/24 reduction in output quantity because it takes time to stop and restart the line. Some say a 3-hour blackout means 10 hours of production stoppage. Some factories are shifting to night time operation; others do not have this option if located in a residential neighborhood.
TEPCO says they are restarting old and decommissioned fuel-burning plants and installing extra gas turbines in existing plants to increase the power generation capacity; but are afraid that they may not be able to meet the peak demand during the summer months. Government is trying to figure out how to handle the peak situation.
5) Save Electric Power Campaign
Government is also asking the general public and businesses to reduce power consumption. It is in general a good thing, but the streets look darker, businesses look less active. This has a negative psychological effect. For example, in subway stations, the fluorescent lighting may be turned off about 30%; many escalators are not running; backlit advertisement panels and directionals are turned off, etc. (However, the ambient lighting is still brighter then NYC subway.) Train and subway services are now running at about 70-80% of normal in terms of frequency. Restaurants are shortening their operation hours so you have to go home at a decent hour.
There has been a big scandal with the Central League of Professional Baseball, who once decided to open the season this week and start night games in their domed fields right away. It would use so much electricity for lighting and HVAC, of course, and it brought a government intervention. Now they gave up on the initial idea and will start the season later and do more day games.
6) Disruption of Heating Oil and Gasoline Distribution
The quakes and tsunamis destroyed some oil refineries along the shore line. A shortage of heating oil as well as gasoline was a big problem for these weeks. The Tohoku Region at the end of March is still cold with the temperature dipping below freezing often.
As the distribution is disrupted because of the confusion on the network, reduced production, or even in case of Fukushima prefecture, refusal of truck drivers to drive into the area near Fukushima Daiichi Plants, heating oil is not reaching those who need it most, and most shelters lack heat. In case they want to evacuate the region to stay with their friends and relatives, they cannot pump gas to their cars. And because there is no guarantee that one can get gas for the return trip, truck drivers are even more hesitant to take aid supplies to the region. The recovery and identification of corpse is taking so long partially because they do not have enough gas to operate available equipment to remove and clear debris.
Even in Tokyo, the city bus services are still reduced. There used to be long lines at gas pumps for a while. The gas situation is much better this week, at least in Tokyo, though.
7) Disruption of General Distribution Network
Because the logistics centers were destroyed in some cases, everyday goods and food items became scarce in Tokyo supermarkets and convinis for a while. The first to go was rice, pastas, pasta sources, potato chips and chocolates (!). Milk and dairy products are also gone from the store shelves. As the facilities were repaired, there was a natural shift to rush materials to the Tohoku Region to help the evacuees. The situation is much better in Tokyo today, most restaurants are open, MacDonald’s and Starbucks are business as usual; but we still see shortages of milk, for example, and bottled water.
In the Tohoku Region where they need much matériel to support the displaced people and start the temporary housing building work as well as the work of community rebuilding, the distribution network is still not back to the full capacity due to the combined effects of fuel shortage, physically severed roadways and bridges, radiation scare, destruction of distribution and manufacturing centers, etc.
8) Business as Usual
In Akihabara last weekend, girls in maid costumes distributed discount coupons for their infamous maid cafés in the street as if nothing had happened. Yodobashi Camera (one of the major electronics gadget retailers) was just as crowded as usual, and its TV section was booming with customers buying new TV sets to prepare for the upcoming switch-over from the analog to digital broadcasting systems. For a while, everybody was stunned and shocked and stopped. But for those who were not directly affected, life must go on, and the economy has to keep moving.
Because of the power shortage and blackouts, some disruption and reduced productivity are expected; but for those who do not appear on the news are basically back to normal and back to work. We seem to be, however, in a somewhat different zeitgeist from three weeks ago.

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