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The Tohoku Economy Two Years On Growing divergence in recovery speeds and more diverse challenges | Naoyoshi Yamada Director-General Tohoku Bureau of Economy, Trade and Industry Ministry of Economy, Trade and Industry (METI) [Date of Issue: 29/March/2013 No.0217-0885]

Date of Issue: 29/March/2013

The Tohoku Economy Two Years On
Growing divergence in recovery speeds and more diverse challenges

Naoyoshi Yamada
Tohoku Bureau of Economy, Trade and Industry
Ministry of Economy, Trade and Industry (METI)

The Tohoku economy is gradually recovering from its post-disaster slump, and a steady overall recovery appears to be underway. Discrepancies are beginning to emerge between regions in the rate of progress toward recovery, while the issues faced and the necessary measures are also diversifying. Looking ahead, in addition to measures which are already being implemented, we will prepare a diverse menu of responses enabling us to tailor our actions precisely to regional needs while also promoting the development of the Tohoku economy as a whole.

It is two years now since the Great East Japan Earthquake, a disaster of unprecedented scale and scope stretching from Tohoku to the Kanto region which caused massive tsunami damage along the Pacific coast.

Over that time, the government has been working to clear away debris, create recovery plans and put infrastructure in place. In the area of industrial stimulation, four supplementary budgets have been formed, with steady progress made on restoration and recovery support initiatives that include institutionalizing the SME Group Subsidy scheme (Restoration and Maintenance Subsidy Project for Facilities of Small and Medium Enterprise Groups), introducing a system for providing temporary factory and store premises free of charge through the Organization for Small & Medium Enterprises and Regional Innovation, Japan, and introducing mechanisms whereby local industrial promotion organizations buy up debt to address ‘double debt’ problems. For the area around the Fukushima Nuclear Power Plant, the government’s focus has been on a corporate location subsidy program for the industrial recovery of Fukushima, assistance in measuring radiation levels as a means of combating reputation damage, and the SME Group Subsidy scheme.

Massive efforts by those involved have achieved solid progress toward disaster rehabilitation, and the Tohoku economy is gradually recovering from its post-disaster slump, with a steady overall recovery underway. According to macro data, the industrial production index for the Tohoku economy slumped from 99.7 (topping the national index of 98.5) in February 2011 immediately before the earthquake to 64.2 in the March immediately after, well down on the national index of 82.5. However, by March 2012, a year later, Tohoku’s industrial production had returned to the same level as the rest of the country. Subsequently, despite the impact of the strong yen and doubts about the European economy, in January 2013, almost two years after the disaster, the index was holding at a satisfactory 88.3 against the national index of 89.7 (see below).

Industrial production index trends Turning to personal consumption, large retail store sales plunged by 22.4 points year-on-year in March 2011 after the earthquake (all stores basis), but underpinned by recovery demand, they topped the previous year’s sales for 14 consecutive months as of May 2011, and have since remained buoyant. Looking at employment, the active job openings-to-applicants ratio shifted from 0.51 in February 2011 to 0.49 in March 2011 and matched the national level of 0.72 in December 2012, topping the national level for 13 consecutive months as of January.

Key public infrastructure directly linked to industrial promotion, such as national roads, ports and harbors, and river-related measures (embankments) under direct state jurisdiction, has progressed more than 95 percent on plan (according to the Reconstruction Agency website).

Even some of those affected areas and companies which continue to struggle are beginning to produce results. Of those companies which have resumed business, sales have returned for around 30 percent. In September 2012, when METI Tohoku surveyed the state of sales for those companies receiving SME Group Subsidies, even in the severely affected fisheries and food processing industries, 6.5 percent of companies had boosted sales above pre-quake levels, and in the case of the construction industry, which enjoys strong recovery demand, 54.2 percent of companies had increased their sales (see below).

State of sales by industry Despite the generic label of ‘affected areas’, different parts of Tohoku are experiencing differences in the degree of recovery progress according to factors such as how badly they were damaged and their particular industrial structures. Looking at trends in business and employee numbers by city, town and village as revealed in the FY2012 Economic Census, some areas have experienced drops of more than 50 percent compared to pre-quake figures, whereas other areas where business resumption and local recovery has been faster have not lost much ground at all (: 271KB).

Two years after the disaster, the challenges facing the various areas are changing according to their particular stage of recovery, diversifying the steps which need to be taken.

Of the wide range of challenges, one which is particularly important as the ‘energy’ driving regional revitalization is industrial reconstruction. METI Tohoku has to date focused on supporting the continuation of company activities and business resumption as the basis for industrial restoration. We will continue steadily implementing these measures, and in addition, recognizing that some areas are about to shift their recovery efforts into top gear, we will develop a diverse menu of measures needed at that stage, including helping to attract companies and develop factory sites and responding to building material shortfalls, carefully tailoring our response to the actual situation of each area.

A further issue is the large evacuee population resident in the Tohoku region as a result of the disaster and the ensuing nuclear power plant accident.

Tohoku Houses The reconstruction of the affected areas needs to be supported by the Tohoku region as a whole, and it would also be no exaggeration to say that without the economic development of the whole Tohoku region, the affected areas too will not recover. Key issues to that end will include expanding auto industry clusters, creating the conditions for vigorous corporate and regional innovation, and making effective use of local resources. The government too will utilize various measures to advance the Tohoku economy as a whole.

Finally, I would like to advertise once again the attractions of Tohoku.

One of Tohoku’s key strengths is its human resources. Many companies set up in Tohoku to take advantage of the diligence and dedication of Tohoku’s workers, and with the March 2012 extra-prefectural hiring rate for new high school graduates from the six prefectures of Tohoku topping the national average, companies continue to enjoy stable access to outstanding human resources in the Tohoku region.

Tohoku is also renowned for its pleasant climate and abundant nature. The average temperature (over the last 30 years; same below) is 3.4-4.5oC cooler than in the major cities (Tokyo, Nagoya and Osaka), and the hottest temperature in August stands around the 27 oC mark. Tohoku boasts high home-ownership rates and short work and school commuting times, while local governments offer solid business support.

While the lowest temperature in January is minus 1.7oC, Tohoku has efficient snow-removal systems in place to keep clear the roads underpinning transport and distribution. For example, over the four months from November 2011, 0.4 percent of traffic stoppages on expressways were caused by snow and 0.2 percent by traffic accidents, while on national highways, snow is cleared once it is between 5-10 centimeters, and an antifreeze agent is spread morning and evening when road surfaces are expected to freeze.

Tohoku has excellent domestic and international access, with its connections to major cities in Japan and abroad via a wide range of regular air and sea services positioning the region as one of Japan’s key hubs. Proximity to parent company and other companies’ factories, related companies and markets is also often given as the reason for businesses choosing to locate in Tohoku.

We are firmly convinced that deploying business in Tohoku will contribute to both the development of the companies who locate here as well as to the recovery of the Tohoku region. We look forward to seeing you!

(original article : Japanese)
(For the Japanese version of this article)

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