As expected, the Great East Japan Earthquake caused great damage to the nation's economy.
Gross domestic product for the January-March period showed an annualized drop of 3.7 percent in real terms.
GDP has contracted for two consecutive quarters since the October-December period, when the economy started to level off.
Before the March 11 disaster, the nation's economy was expected to go on an offensive in an increasingly multipolar global market following the recovery of the U.S. economy. But the earthquake took the wind out of Japan's sails.
The April-June quarter is also expected to undergo economic contraction, according to private-sector estimates.
While demand for reconstruction rose smoothly after the 1995 Great Hanshin Earthquake, the situation this time differs mainly on two points.
One is the accident at the Fukushima No. 1 nuclear power plant operated by Tokyo Electric Power Co.
With the decline in electric power supply centering on the Tokyo metropolitan area covered by TEPCO, prolonged restrictions on economic activities are unavoidable.
Second, the supply chain, or a highly mutually dependent supply network of parts that developed in the assembly-oriented manufacturing industry, suffered serious damage.
For example, assembly plants of many automakers would stop if a semiconductor plant is unable to make microcontrollers for electronic controls.
The earthquake put before us a new question: What should be done for the Japanese economy to continue to provide top-level products and services to meet the needs and purchasing power of various markets around the world?
Japan must come up with highly advanced products that cannot be found anywhere else to overcome the yen's appreciation and continue exporting.
However, manufacturing centers of such products tend to be concentrated on one site when volume efficiency and other factors are taken into account.
Such risks were exposed by the severing of the supply chain by the earthquake.
There is also a possibility that international customers may re-examine their overdependence on Japanese parts and materials.
Manufacturers are urged to disperse production centers and take other measures to prevent customers from going elsewhere.
Meanwhile, the expansion of the service industry is attracting attention as a growth strategy.
Still, there is a need to review Japan's real capabilities comprehensively when we think about the failure of two giant service companies--TEPCO's nuclear power plant accident and Mizuho Bank's system trouble--both triggered by the earthquake.
Large corporations protected by monopoly or oligopoly may be suffering from systemic fatigue more than we realize.
Such a situation may be standing in the way of innovation and nipping creative ideas in the bud.
If so, creating an environment to make companies stronger through competition becomes more important than ever.
Kaoru Yosano, minister in charge of economic and fiscal policy, expressed confidence for the future, saying, "The resilience of the Japanese economy is sufficiently strong."
But instead of simply relying on natural resilience, we should sort out our strengths and weaknesses and cultivate the power to transform ourselves and open up the future with new ideas and ingenuity.
--The Asahi Shimbun, May 20
Gross domestic product for the January-March period showed an annualized drop of 3.7 percent in real terms.
GDP has contracted for two consecutive quarters since the October-December period, when the economy started to level off.
Before the March 11 disaster, the nation's economy was expected to go on an offensive in an increasingly multipolar global market following the recovery of the U.S. economy. But the earthquake took the wind out of Japan's sails.
The April-June quarter is also expected to undergo economic contraction, according to private-sector estimates.
While demand for reconstruction rose smoothly after the 1995 Great Hanshin Earthquake, the situation this time differs mainly on two points.
One is the accident at the Fukushima No. 1 nuclear power plant operated by Tokyo Electric Power Co.
With the decline in electric power supply centering on the Tokyo metropolitan area covered by TEPCO, prolonged restrictions on economic activities are unavoidable.
Second, the supply chain, or a highly mutually dependent supply network of parts that developed in the assembly-oriented manufacturing industry, suffered serious damage.
For example, assembly plants of many automakers would stop if a semiconductor plant is unable to make microcontrollers for electronic controls.
The earthquake put before us a new question: What should be done for the Japanese economy to continue to provide top-level products and services to meet the needs and purchasing power of various markets around the world?
Japan must come up with highly advanced products that cannot be found anywhere else to overcome the yen's appreciation and continue exporting.
However, manufacturing centers of such products tend to be concentrated on one site when volume efficiency and other factors are taken into account.
Such risks were exposed by the severing of the supply chain by the earthquake.
There is also a possibility that international customers may re-examine their overdependence on Japanese parts and materials.
Manufacturers are urged to disperse production centers and take other measures to prevent customers from going elsewhere.
Meanwhile, the expansion of the service industry is attracting attention as a growth strategy.
Still, there is a need to review Japan's real capabilities comprehensively when we think about the failure of two giant service companies--TEPCO's nuclear power plant accident and Mizuho Bank's system trouble--both triggered by the earthquake.
Large corporations protected by monopoly or oligopoly may be suffering from systemic fatigue more than we realize.
Such a situation may be standing in the way of innovation and nipping creative ideas in the bud.
If so, creating an environment to make companies stronger through competition becomes more important than ever.
Kaoru Yosano, minister in charge of economic and fiscal policy, expressed confidence for the future, saying, "The resilience of the Japanese economy is sufficiently strong."
But instead of simply relying on natural resilience, we should sort out our strengths and weaknesses and cultivate the power to transform ourselves and open up the future with new ideas and ingenuity.
--The Asahi Shimbun, May 20
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