This document presents an analysis of the indirect economic impacts of the 2011 Great East Japan Earthquake using a spatial computable general equilibrium (CGE) model. The model estimates losses from both direct damage to infrastructure and industries as well as indirect impacts through supply chain disruptions. The results suggest that approximately 80% of economic losses were due to direct damage and capacity losses, while 20% were due to indirect effects. Industries like metal and machinery production experienced greater indirect impacts. The model estimates total annual losses of around 36 trillion yen, with the majority occurring in the Tohoku region near the earthquake's epicenter.

1. IDRC, Davos, 2012
Indirect Economic Impacts of the Great East
Japan Earthquake: Approach by Spatial
Computable General Equilibrium Model
Yoshio Kajitani and Hirokazu Tatano
1 Disaster Prevention Research Institute Kyoto University

2. Economic Loss Estimation
Production Level
Disaster
Time
Lifeline Disruptions,
Capital and Labor Losses
Supply-Chain Impacts, etc.
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3. Objectives
 To establish the integrated economic estimation
loss method
 to reflect the induced damage caused by the supply
chain disruption as well as the direct damage
(capacity loss) caused by the reduction of production
capacity due to facility damage and lifelines
disruptions.
 To conduct economic loss estimation for the case
of the Great East Japan Earthquake and
Tsunami
 to investigate major factors of economic impact of
the event
3 and loss distribution amongKyoto University sectors.
areas and
Disaster Prevention Reasearch Institute

4. Process of the Impacts
Natural Disaster
Damages to
Capitals, Labor and
Infrastructures
Production Capacity Losses
Damages
to
Production Changes Household
IO, CGE model
Supply Chain Impacts, Demand Changes, Trade
Pattern Changes (Price Changes)
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5. (S)CGE: (Spatial) Computable General Equilibrium
Model (household-industry model)
．．．．
Region A Region C
Region B
Household Househol
Transportation d
Cost
input Goods Goods
Labor
Market Market Market
Firms
Firms
Imports Exports
Export Import
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6. Example of Production Structure
Production Output y αf ( x1 ,..., xn )
Leontieff
Value Added Composite Intermediates
CES CES ( d ) 0.15-0.80
Land Labor Capital Domestic Goods CES ( e)
Imported Goods from different countries
integrated as capital
Countries are not considered
(one foreign imports)
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7. Key Assumptions
 Elasticity of Substitutions among regions：
Intermediate goods: 0.15-0.80 （Koike et al., 2011）
Final goods: 2.0
 Income of household: No changes before and after the
disaster Firm retains their losses and transferred to
stock holders
 Goods and Services: Price can be changed (Increase for
scarcity goods)
 Foreign imports (no price change/ import ratio is same as
before disaster)
 Damage Ratio: Capacity Losses in a previous
presentation
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8. Classification of Sectors
1 Agri ture, Forestry and Fi
cul shery
2 M i ng
ni
3 Food
4 M etal
5 M achi nery
6 O ther M anufacturi ng
7 B uidi and M ai
l ng ntenance
8 Publc C onstructi
i on
9 O ther C onstructions
10 Electri ty, W ater, G as, H eat Suppl
ci y
11 Retai and W hol e
l esal
12 O thers
13 Transportati on

9. Economic Losses in households (Equivalent
Variation: forgone opportunity of consumption)
EV
0
Million Yen
-2000000
-4000000
-6000000
-8000000
-10000000
-12000000
Tohoku
-14000000
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10. Total Losses (EV + Supplier Surplus)
Million Yen 0
-2000000
-4000000
-6000000
-8000000
-10000000
-12000000 Tohoku
-14000000
About 36 trillion yen=45 billion dollars/year 3.75 billion dollars/month
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11. Characteristics of Production Decrease
Chugoku Shikoku Kyusyu
4% Kinki 0% Hokkaido
1% Tohoku
0%
Chubu 3% (Indirect) Induced loss=32%
Kanto 4% 9%
(Indirect)
11%
Kanto
(Direct/Capacity
Tohoku
Loss)
Direct loss 14%
(Direct/Capacity
Loss)
(Production
54%
capacity
loss)=68%
Induced Economic Loss /Production Capacity Loss
=1/2
Metal Production Sector
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12. Kanto (Indirect) Kinki Chugoku Shikoku Hokkaido
4% Kanto 0% 0% 0% Kyusyu 0%
(Direct/Capacity Chubu 0% Tohoku
Loss) 2% (Indirect) Induced loss=15%
8% 9%
Direct loss Tohoku
(Production (Direct/Capacity
capacity Loss)
loss)=85% 77%
Induced Economic Loss/Production Capacity
Loss Machinery Sector
=1/12
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13. Index of Industrial Production (March/Feb)
1.2
1
0.8
0.6
0.4
0.2
0
Hokkaido Tohoku Kanto Chubu Kinki Chugoku Shikoku Kyusyu

14. 1
0.8
0.6
Food
0.4 Metal
Machinery
0.2
0
(Effects of Brownout is not considered)

15. Loss Distribution in Tohoku
1.2
1
0.8
0.6 Food
0.4 Metal
Machinery
0.2
0

16. 10% more shock in Kanto Region
1.2
1
0.8
0.6 Food
Metal
0.4
Machinery
0.2
0
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17. Conclusions
 An integrated economic estimation loss method is
proposed.
 It basically agrees with the economic indicators after the
events.
 In the case of the Great East Japan Earthquake and
Tsunami, about 80% of economic loss is due to
production capacity loss including facility damage and
lifeline disruption, and the 20% is due to induced
loss, e.g., supply chain disruption in March 2011.
 To fit the result of the model to observed data(IIP), about
additional 10% loss of production capacity in “Kanto”
region. This could support the opinion the brown out after
the quake caused about 10% production capacity loss in
the region.
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