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The Impacts Of Indian Ocean And Japans Tsunami Economics Essay

n recent years, more and more kinds of natural disasters are occurring in the whole world. The effects of natural disasters are serious and ruinous. It often brings tragic events to economics, environment or humans. Personal property, national property and other natural resources are usually damaged by natural disasters. Natural disasters affect infrastructure, such as roads, railroads and airports; farm and stock raising production; energy and other aspects of an economy.


Japan and Indian Ocean’s Tsunamis caused serious economic impact. The purpose of this report is to evaluate the economic effects of these two natural disasters on the national and global economy. It focuses on which one’s economic effect is the largest around the world.

1.3 Scope

This report evaluates the economic effects of Japan and Indian Ocean’s Tsunami around the world, focusing on international impacts. This report will analyse the impacts from energy impacts, stock market impacts, import and export trade impacts, tourism impacts and goods.

Indian Ocean’s Tsunami

An Overview

On the morning of Sunday 26 December 2004, a severe earthquake in the ocean off the coast of Northern Sumatra caused tsunamis that devastated communities in neighbouring countries and other countries in the Indian Ocean. The earthquake measured 9.0 on the Richter scale; the world’s most severe in 40 years (Australian Government 2007). Indonesia, India, Sri Lanka, Malaysia, Thailand, Myanmar, Maldives, Bangladesh and other Indian Ocean countries were hit by the tsunami attack and nearly 30 million people perished in the tsunami.

The Economic Impact of the Indian Ocean Tsunami

Tourism Impacts

The impacts of the Indian Ocean’s tsunami on the tourism industry in Southeast Asia are serious. Tourism is a pillar industry in Southeast Asia, especially in Thailand, Maldives, Malaysia and other big countries in Southeast Asia. Annually, these countries attract 1 2OO million tourists to go sightseeing (Xiao 2005). But the tsunami destroyed the tourist facilities in many countries in Southeast Asia, but also destroyed the tourist area of most hotels; forcing tourists to cancel or change all over the world recently to Southeast Asia travel plans. The Indian Ocean Tsunami brought a tremendous impact on the tourism industry economy in Southeast Asia.

Stock Market Impact

The Indian Ocean tsunami hit the stock market in Southeast Asia. After the tsunami, stocks fell in the Asian stock market, including aviation stocks, tourism stocks, hotel stocks, and band and insurance stocks. According to the research, the Thai stock market declined about 1%, the Singapore stock market fell 0.44%, Malaysia Stock Exchange’s main index fell 0.5%, Indonesia’s stock market also fell, and the Tokyo stock market Nikkei 225 index also fell (Shandong 2004). The Exchange market, Japanese yen, Thai baht, Indian rupee, rupiah and other Asian currencies against the euro and the dollar fell the day (Shandong 2004). The Asian economy is a big part of global economy, the Indian Ocean Tsunami hit the stock markets in Asia, and it also stroked the global stock market.

Japan’s Tsunami

An Overview

The March 11, 2011, the earthquake and tsunami that occurred in Japan followed by the nuclear crisis at the Fukushima Nuclear Complex, evacuations, and shortage of electricity are having a large negative economic impact on world markets. Physical damage has been estimated from $195 billion to as much as $305 billion (Asia News Network 2011). Japan is the very important economic country in the world. As the third-largest economy in the world, Japan’s GDP at $5.5 trillion accounts for 8.7% of global GDP (Dick 2011).

The Economic Impact of Japan’s Tsunami

Energy Impacts

Japan’s economy was destroyed by a strong earthquake and tsunami. When the world’s third largest economic country (after US, China in that order) was doing well in recovery as the final quarter of their last year was not so good at that time the tsunami happened (Habito 2011). The shut down of the nuclear power plants and oil refineries have led to an immense loss in the day. The main effect of Japan’s tsunami is energy production centres have a sudden increase in energy, have caused higher oil prices (Habito 2011). High energy costs affect the entire economy because energy represents a key element in production of goods and services. The impact of the Japanese market was seen in European and other Asian markets as well. Bombay Stock Exchange or Sensex (India) plunged by 0.84%. Some of the major re insurers like Swiss Re, Hannover Re and Munich Re were all down more than 4 percent (Shrivastava, 2011). The main effects of the Japan’s Tsunami is on energy production centres, causing higher oil price, and high energy costs affecting the global oil price increase.


“As the third-largest economy in the world, Japan’s GDP at $5.5 trillion accounts for 8.7% of global GDP” (Dick 2011). However, its contribution to growth is far less because of the huge trade surpluses that it runs. Japan is produce automobile, electronics and related technology in the world, and the tsunami’s impacts are serious for Japan’s manufacturer, causing the higher price automobile, electronics and related productions in other countries. “General Motors announced that it was temporarily halting production at a plant in Louisiana making small pick- up trucks due to a lack of parts from Japan” (Dick 2011). “Boeing, Volvo and BMW depend on inputs from Japan to keep their plants operating and long delays could eventually halt production at some of their plants” (Dick 2011). The tsunami also affects agricultural production, leading to higher food prices for consumers. Affecting crop yields in the short run and destroying an entire harvest and lead to livestock deaths, affecting produce and meat prices growth around Asia (Dick 2011). Some countries will definitely feel the impact from the economic downturn in Japan.

Import and Export Trade Impact

Japan is a coastal area, the tsunami affect the level of imports and exports. The nation’s major ports were destroyed by the tsunami (Mogi and Fabi 2011). Other countries cannot import and export trade, the economic effects is serious for their own country or other countries. The tsunami affects agricultural production and livestock deaths, causing produce and meat cannot export trade (Dick 2011). “Many of Asia’s key industries depend on specialized Japanese components to keep their plants operating” (Beckman 2011). Shipments from Japan could hurt production and economic growth in this country.

Stock Market Impact

Figure1: Financial fall out (Steiner 2011, pg 1)

Figure 1 shows the Nikkei index fell 6.18 per cent in the first full day of trading after the tsunami and the Yen fell against the dollar. In Japan, the stock markets decreased by 6.18 per cent and devastated the Japan’s economy (Steiner 2011). “The benchmark Nikkei 225 stock average shed 633.94 points, or 6.18 per cent, to 9,620.49 at the close of trading “(Steiner 2011). It is clear to see the stock market was hit by the tsunami, and Japan is the third largest economic country in the world so the global economy was also affected by the tsunami.


The economic impact of these natural disasters is serious. The economic impact of the Indian Ocean tsunami is mainly the scope of other Southeast Asian countries and affecting the tourism industry, and the stock market. However, the economic impact of Japan’s tsunami is greater and more serious than Indian Ocean tsunami, Japan is a big manufacturer, many of countries industries depend on specialized Japanese components to keep their plants operating. Japan’s tsunami caused the shut down of nuclear power plants and oil refineries have led to an immense loss in the day. The important impact of Japan’s tsunami is energy production centres have sudden increases in energy, have caused higher oil prices. The Japan’s Tsunami affected crop yields in the short run and destroying an entire harvest and lead to livestock deaths, affecting produce and meat prices growth around Asia. According to this report, the economic impact of the tsunami in Japan can be clearly seen as larger than Indian Ocean tsunami in 2004.

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