Mitsuru Okiyama

Impact of the Great East Japan Earthquake on Production Loss Using an Inter-Regional Social Accounting Matrix

Using an inter-regional social accounting matrix, this chapter estimates the magnitude of production losses in both the disaster-affected and disaster-unaffected regions in Japan caused by production damage to agriculture and fisheries and by the loss of capital stock to the manufacturing industry. In addition, we also examine the cost-effectiveness of recovery support by comparing the initial production loss with that 1 or 2 years after the earthquake. Our estimates show that (1) the production loss caused by damages to agriculture and fisheries were 655.7 billion yen in the disaster-affected region and 2.69 trillion yen in the disaster-unaffected region; (2) the production losses caused by the loss of capital stock to the manufacturing industry were 937.2 billion yen in Fukushima Prefecture and 3.132 trillion yen in the other three disaster-affected prefectures (amounting to 5.9% and 6.0%, respectively, of the gross production value in the economic activity sector in 2005); and (3) 2 years after the disaster, the production loss in the disaster-affected region reduced by 311.4 billion yen, owing to the 2 years’ worth of recovery support for agriculture and fisheries, thereby confirming the cost-effectiveness of this support. However, these estimations are based on the multiplier effect, on the assumption that the halt in production activities caused by the damage persists for 1 year.

Impact of Climate Change on Regional Economies Through Fluctuations in Japan’s Rice Production: Using Dynamic Panel Data and Spatial CGE Models

The agriculture industry would be most affected by global warming-induced climate change. Based on the assumption that only rice is affected by global warming, this study examines the impact of global warming on regional economies based on the spillover effects from other agricultural products and the industrial sector having an input–output relationship with agriculture. Our findings show that global warming-induced climate change has different impacts on each region, and it creates regional economic disparities. For example, global warming has a positive impact on regional economies in Hokkaido and Tohoku. In addition to increasing rice production, the gaps in rice prices in Kanto and the region west of Kanto will increase outflow, which in turn further increases production. Meanwhile, global warming will reduce production in Kanto and the region west of Kanto, and it will have a negative impact on regional economies. Furthermore, other agricultural products will be negatively affected in all the regions due to changes in rice production, while production in the food and beverage industries will be negatively affected in Kanto and the region west of Kanto. However, when the impact of global warming becomes greater, production in the food and beverage industries will increase in Hokkaido and Tohoku. Finally, we find that there is the good impact of adaptation technologies on the production of rice in Kanto and the region west of Kanto from simulation results of the development of adaptation technologies such as high-temperature-tolerant rice varieties in regions affected by global warming. Thus, the promotional policy of adaptation technologies such as high-temperature-tolerant rice varieties and public support for industrial clusters based on rice are necessary in order to eliminate the disparities in regional economic welfare caused by global warming.

Economic Analysis of Fiscal Measures for Reconstructing the Tohoku Region After the Great East Japan Earthquake: Using a Dynamic Two-Regional CGE Model

This chapter measures the economic impact of the reconstruction budget and illustrates the transition of the regional economies in the disaster-affected region amid a declining population using a recursive dynamic regional CGE model. Our findings are as follows: Firstly, even if the Great East Japan Earthquake had not occurred, the disaster-affected region would have experienced weaker growth in its sub-regional economies owing to the impact of a declining population. Secondly, the fiscal measures in the intensive reconstruction period contribute toward recovering the real Gross Regional Product (GRP) of the disaster-affected region, which slumped following the Great East Japan Earthquake. But, the real GRP of the disaster-affected region begins to move downward after 2018. However, the fiscal measures would slow down the pace of curtailment of the regional economies in the disaster-affected region compared with the scenario without fiscal measures. Third, it is advisable that the government should provide fiscal measures to the disaster-affected region after the intensive reconstruction period by adopting a different form of reconstruction budget, that is, by revising the distribution ratios of the local allocation tax grants. However, this measure alone would not allow the regional economy in the disaster-affected region to recover and exceed the level prior to the earthquake. In order to realize sustained economic growth, it is necessary to take other measures after the intensive reconstruction period, such as productivity improvements in each industry located within the disaster-affected region, using fiscal transfers.

Analysis of Supply Chain Disruptions from the Great East Japan Earthquake in the Automotive Industry and Electronic Parts/Devices

This chapter constructs a two-region computable general equilibrium (2SCGE) model for the regions affected and not affected by the Great East Japan Earthquake of 2011. Using this model, we simulate negative supply shocks for both the upper-level sectors between regions and the lower-level sectors within the regions. Our results can be summarized as follows: (1) For negative supply shocks in the upper-level sectors across regions, production of automotive parts in the affected region could decline by as much as two times and still not have much of a negative effect on automotive assembly and production of automotive parts in other regions, if those parts are of commodity-grade. (2) For negative supply shocks in lower-level sectors within each region, to the extent that raw materials and intermediate goods produced by the manufacturing sector in the lower portion of the automotive production pyramid in the affected regions are difficult to source from non-affected regions; the more production in that industry drops, the greater is the negative effect on production of automotive parts and automobile production in the affected regions. From these results, we can derive the following implications: First, the automotive industry clusters in the affected region are inevitable, given the number of automotive parts. However, to construct a production pyramid structure, and from the standpoint of managing the risks from natural disasters, the pyramid must be completely formed while also being flexible across regions. This is another reason that it is preferable to avoid parts which can only be sourced from the same region and have even raw materials and intermediate goods be commodity-grade and substitutable from other regions, supplied by manufacturers in the lower portion of the production pyramid in the same region. Second, in addition, industrial promotion measures are required to aid the formation of such automotive industry clusters. For this purpose, one should consider utilizing the fiscal measures currently being undertaken for the affected regions.

Economic Analysis of Regional Renewal and Recovery from the Great East Japan Earthquake

The Great East Japan Earthquake, which struck on March 11, 2011, had a massive economic impact, primarily on the affected areas in Japan. In this chapter, we examine the economic and human damage inflicted on Iwate, Miyagi, Fukushima, and Ibaraki Prefectures by the Great East Japan Earthquake, as well as the current situation of industrial recovery, based on several statistical sources and a geographically weighted regression (GWR) model. In the latter part of this chapter, we will show the extent of fiscal transfers to date from the government for reconstruction and renewal of stricken areas and analyze the economic effect of the formation of new industrial clusters for reconstruction and renewal on these areas using a static two-regional computable general equilibrium (2SCGE) model. Our findings are as follows: (1) if production subsidies to support industries form new industry clusters, positive effects on regional economies could appear in the disaster regions; however, these impacts are weak and (2) formation of new industry clusters with productivity improvement has a positive effect on real gross regional product (GRP) and economic welfare in these regions, reducing the economic welfare gap between disaster and non-disaster regions.

Measuring Economic Gains from New Food and Automobile Industry Clusters with Coagglomeration in the Tohoku Region

In this chapter, we will take the concepts of Porter’s (1998, 2000) clusters and present an analysis of the feasibility of ongoing economic development in disaster regions, utilizing two new industry cluster models. The two clusters are the automobile industry, which targets the entire disaster region and where innovation comes from coagglomeration with different industries in megaregions, and the food industry, which, focusing on leveraging local resources, targets individual disaster-struck prefectures. This study applies a dynamic two-regional computable general equilibrium (D2SCGE) model, constructed in Chap. 5, assuming Scenario C (continuation of fiscal support for reconstruction on the basis of a new approach in a 5-year construction period from 2016 to 2020, following the intensive reconstruction period) as the base scenario. We constructed scenarios for each of these two clusters and evaluated the economic effects of each new industry cluster on disaster regions. A simulation analysis of scenarios for these two new clusters with positive and higher productivity in the coagglomerated industries reveals the following two effects: (i) economies of agglomeration from vertical and horizontal coagglomeration boost the real Gross regional Product (GRP) and productivity at the macro level when the two new industry clusters are formed jointly rather than separately and (ii) the clusters contribute to long-term, sustained growth in disaster region economies, thus reducing the gap between their growth and that of other regional economies. This can be interpreted to mean that the usual policies adopted, such as subsidies and corporate tax cuts, are unable to counteract economic stagnation resulting from sharp population decline in disaster regions. It also suggests that agglomeration externalities, evidenced by improved productivity in the formation of new food/automobile industry clusters, can offer sustained economic development in disaster regions.

Impact of Expanding Bio-fuel Consumption on Reduction of CO2 Emissions in Thailand:

In this paper, we verify the impacts that expanded bio-fuel consumption may have on reduction of CO2 emissions from automobiles in the household sector. We believe increasing production volume by popularizing bio-fuels may help increase the household income of farmers that produce raw materials for bio-fuels and increase the total household Equivalent Variations (EV) .First, considering the tax privileges provided for E10 (10% ethanol blended) and B5 (5% bio-diesel blended) , the indirect tax rate for bio-fuel decreased by 85.34% when subsidies were deducted from the taxable income. Based on these estimations, we performed a simulation to detect the effectiveness of a campaign popularizing bio-fuel usage alone by utilizing the Computable General Equilibrium (CGE) model to reproduce the actual situation of bio-fuel popularization in 2007. As a result, the rate of change in CO2 emissions from automobiles decreased 0.266% and the total household EV gained 1.14 billion baht due to increased farmer and non-farmer household benefits in areas other than the Greater Bangkok Metropolitan. In addition, simulations in which the indirect tax rate for bio-fuel gradually decreased from the level in 2007 showed that the consumption of bio-fuels has been rising and the reduction of CO2 emissions has been expanding to increase the total household EV.Second, when blended fuels such as E10 and B5 are fully used by the household sector it is even more important for the Thai government to provide subsidies to the bio-fuel industry and industries supplying bio-fuel materials for promoting bio-fuel usage policies and sustained economic development. To secure financial resources to achieve this purpose, the government should raise indirect taxes for the services industries. At the same time, the government should also take measures to decrease the direct tax rate for households. In our simulation based on this scenario, it was possible to reach a decrease of 0.685% in the reduction of CO2 emissions by substituting bio-fuels for fossil fuels even though fuel consumption expanded with an increase in the income of farmer households. As spillover effects on activities in the production sector, we found the following. First, the negative effects on the agriculture food processing industries by preferential treatment of the bio-fuel industry and bio-fuel related industries remained small. Second, the production volume of other agriculture products such as livestock, fishery, rubber and other crops decreased because production shifted to bio-material crops for the bio-fuel industry. Third, an increase in the indirect tax for service industries had the largest negative effects on the transportation and communication industries.Based on the above, if the Thai government can promote bio-fuel usage policies as planned, it is possible not only to reduce CO2 emissions but also to increase the benefits for the household sector.JEL Classification: C68, O53, Q42, R13, R38