The East Asian Connection in Post-Quake Recovery

The earthquake and tsunami of March 11 dealt a major economic blow to Japan—particularly to the areas of Tōhoku and Kantō directly hit by the disaster. What should the government be doing to get the local and national economies back on their feet? The results of a simulation analysis carried out by researchers at the Economic Research Institute for ASEAN and East Asia (ERIA) may help point us in the right direction. Although admittedly tentative and contingent on a number of assumptions, the conclusions are worth summarizing here.

The Need for Speed

The basic thinking informing the ERIA simulation study was that while the national infrastructure linking Japan’s prefectures can be rebuilt fairly quickly, it will take longer to restore local-level infrastructure, including transportation and communication networks, electricity and water-supply infrastructure, and industrial and commercial facilities damaged or destroyed by the disaster. The longer it takes for Tōhoku to recover, the more businesses will choose to relocate their facilities elsewhere, and the more people will migrate to areas that offer a better living and working environment.

Such a migration of businesses and people would result in a long-term shift in Japan's internal geo-economic balance. If this happens, the disaster's impact on the hardest-hit areas of eastern Japan—particularly Fukushima, Miyagi, and Iwate Prefectures—could turn out to be irreversible.

So what can be done to accelerate the recovery of the Tōhoku district and minimize long-term damage?

Not surprisingly, the study concluded that the first priority should be to rebuild local infrastructure as quickly as possible. In this context, “infrastructure” must be interpreted broadly, to include not only restoration of transportation, power, and water-supply facilities but also investment in human and social capital.

Looking Outward

Another key to revitalizing the economy, however, lies in strengthening our links with East Asia’s production networks by expanding our capacity as a base for air and sea distribution. For Tōhoku, the focus should be on developing the district’s functions as a logistical distribution hub for high-value-added lightweight precision machinery.

The first step will be to transform Sendai Airport into a round-the-clock transportation hub. Other measures that should be considered include linking Sendai with the increasingly important international distribution hub of Naha Airport, reducing airport taxes and landing fees at Sendai, and introducing tax exemptions on earnings from international distribution of goods through Sendai Airport. At the same time, measures should be taken to boost the volume and efficiency of maritime shipping between western Japan and the rest of East Asia in order to make Japan a more attractive location for business.

The analysis also underlined the importance of lowering persistent barriers to regional trade, systemic or otherwise, in order to maximize the benefits of a stronger Japan–East Asia economic network. Instead of using the March 11 disaster as an excuse for postponing a decision on whether to join negotiations on Japanese participation in the Trans-Pacific Partnership trade agreement, the government needs to enter into negotiations as soon as possible.

Speed will be of the essence in rebuilding after the devastation of the Great East Japan Earthquake. In times of national crisis, there is always a tendency to look inward. But if we are to achieve a speedy and sustainable recovery, we need to make sure that our reconstruction plans incorporate a forward-looking strategy for Japan’s wider role in East Asia and the world.

(Originally written in Japanese on May 9, 2011)