The 9.0 scale earthquake & tsunami have destroyed most of cities near the sea in TOHOKU area and most of the cities suffered malfunction of economic activities. Auto plants, electronics factories and refineries shut, roads buckled and power to millions of houses and businesses were knocked out. Several airports, including Tokyo Narita Airport, were closed and rail services halted. All ports were shut. The worst matter is about Fukushima Nuclear Reactors damages still remain in critical situation. Massive amount of radioactive Iodine-131 found in the sea water near the reactors. The measured result is 7.5Million times higher than normal level. The Japanese Government estimation this month of the direct damage from the disaster is as much as $310 billion, making it the world's costliest natural disaster, thus far. The figure could be even higher, as the estimation does not include losses pertaining to economic activities from planned power outages or the broader impact of the crisis at the stricken nuclear power plant in Fukushima, which economists said pose the biggest risks to the economy of Japan. The impact from the planned power outages is likely to be significantly on a very high note. This estimated range would amount to about 6% of Japan’s GDP (Gross Domestic Product).
Yen per Dollar rate and Nikkei Average
The graphs show how earthquake effect Japan economies. My personal opinion is that Yen rates raised up very high because most of investors thought most of Japanese investors will try to bring asset from out of Japan back to Japan to recover the crisis, so everybody will buy yen because they knew yen will be valuable and needed. This is affecting from money game that someone is manipulating information and trust to gain profit, that is how the systems work. I think Japanese Investors will not easily bring back their asset because they will think about risk distribution. Even insurance companies must have enough cash in Japan. I think most of investors will return back the asset partially time to time. However it doesn’t matter of what the investors believe. Somebody surely making big profits from this phenomenon. Nikkei average dropped down because most of the main companies are related to import and export sector therefore the investors will sell their stock when the yen rise up. The thing I see after the earthquake is, the asset/money from Japan easily flowing away from Japan and asset/money from outside hard to flow into Japan. I am worried that this process will speed-up the hollowing out of capital and Japan industries. However, it seems that the yen rate getting better slowly, maybe Central Bank of Japan action starting to give effect. In an initial response to the devastation, the Central Bank of Japan doubled the funds earmarked for purchases of a range of assets and started pumping record amounts of cash into the money market to prevent it from seizing up. Central Bank followed up by joining forces with other G7 central banks in a rare coordinated move to keep a rallying yen from inflicting further damage to the already crippling economy.
Currently, oil price rising up and most constructions material supplies are not enough to cover the demands, so this matter will slow down the constructions process that will delay the economic recovery. Power Supplies also will be a big problem because with current capability, they will not be able to cover power demand in the summer season (peak off the year). Power shortage will slow down the production in Japan; most of factories have to distribute their production load to prevent power shortage. In order to reduce peek value, we have to make sure to reduce overlapped power usage at the same time. Companies such as Sony Corp. and Toyota Motor Corp. have halted production after the 9.0-magnitude temblor and an ensuing tsunami damaged power-generating facilities including the Fukushima Dai-Ichi nuclear plant.
I think most of companies will use night time and holidays to distribute their production loads. However, they have to pay more to their employees for it. Distribution of production will encourage the distribution of logistic and at the same time management cost also will rise up. Therefore cost per product will rise-up. I don’t think the clients would agree to accept higher cost in the current situation. For many years Japan is suffering a great competition from China, Korea, and ASEAN and to remain competing in global market we have to implement more kaizen to reduce cost. We have to set priorities in order to focus on our resource while monitoring environment changes. Japan still under the threat of aftershock and nuclear power plant crisis, so most of companies in Japan will start to relocate the factories out of Japan to manage the risk and to reduce the cost. These also worries me because shifting factories to foreign will affect labor market and wage base that will shrink the domestic demand slowly for long range of time.
Government is short of money now, but by increasing the tax will not be a good decision to make. I hope they would not do it because it will slow down the economy activities. I think its time where Government, Industries and Academics collaborate to create new strategies to survive. For now Japan is world giant manufacturer, so that will make them compete with low wage labor from foreign countries. The problem is how to change the “Red Ocean” to “Blue Ocean”. I hope most of you all knew about Blue Ocean Strategy. Key concepts of blue ocean strategy are value innovations, the simultaneous pursuit of differentiation and low cost. New strategies must really understand the market needs that some time not only by providing highest technology and quality. The fact that Japan has great technologies never change, the problem is about market segmentation and positioning, how to deliver the best values to the right segment or layer of client in global market.
Government, Industries and Academics must start paradigm shift from “Product Out” to “Market In”. If we study marketing we will learn about Product Out and Market In, of course most of Japanese companies apply high level marketing technique to sell their product but what I personally realize is when we observe from macro perspective, Japanese are “職人：Syokunin” that mean craftsman. Spirit of craftsmanship makes them really discipline and mentally strong to execute their mission. They always focus in creating/producing high quality (function and structure) to make their client satisfied. Most of them dedicate their live for it. This great advantage some time will be a weakness when global market is changing, economic power balances are changing. This would mean that the developing country is starting to shift from labor market to consumer market. In this situation, people needs is really complicated depend on their cultures, economic status and their future visions. Even global markets now have similar financing system, logistic system and business standards, their needs are different. Craftsmanship's pride will sometime make them overlook what their clients want when the need is much low tech or simple. Sometime it is not about the technologies, it’s about the problem solution in daily life, to live in prosperity life…
I am sure Japan will rise back from this crisis. I am also will part of it. My personal thought is economy will start to recover from November 2011. It will take few years, maybe 5~6 years to recover fully. Every change will be chances of business, to anybody who thinking about gaining profit by contributing to Japan. Now its a great chance. Construction materials, furnitures, Baby foods, agriculture products is needed here. If the prices are lower than market price people will buy. Foods from foreign now will look safer than the local made foods because of nuclear radiation.
