Preliminary Reports from the Hyogo-ken Nambu Earthquake of January 17, 1995

Economic Impacts

By Stephanie E. Chang

Official estimates released one week after the Hyogoken Nambu earthquake place the economic toll at up to 10 trillion yen (roughly $100 billion) in repair costs alone, but we may never know the full extent of the disaster's economic impact. Now being referred to as the Great Hanshin Earthquake, this disaster has paralyzed the economy of Kobe in a way previously unexperienced in a modern urban area.

The severity of the socioeconomic impact arises largely from the urban geography of the Kobe region. Hemmed in by mountains on one side and ocean on the other, Kobe represents a development corridor of high population and infrastructure density. In the most heavily impacted wards and cities in the area, population density varies from 3,900 to 10,800 persons per square kilometer; by contrast, the cities of Los Angeles and Oakland, which were heavily impacted in the Northridge and Loma Prieta earthquakes, have population densities of 2,900 and 2,600 persons per square kilometer, respectively. Furthermore, the region served as an important rail and road transportation corridor between northern and southern Japan, and Kobe port was important for international ocean freight.

The severe damage to the region's transportation infrastructure is already having significant economic repercussions. Cessation of port functions has impeded the shipment of raw materials and parts between businesses in Japan and their subsidiaries or partners overseas, impacting firms in the electronics, apparel, and auto manufacturing industries, among others. Rail and road transportation disruption has affected a number of firms relying upon just-in-time production systems; in several instances, this caused automobile and motorcycle manufacturers to temporarily shut down plants located far from the shaken region.

Structural damage as well as losses of other lifelines, primarily water and gas, have also severely impacted business activity in the region. In the first week after the earthquake, virtually no businesses were operating; those that were open were establishments such as repair shops, shoe stores, banks and gas stations which did not rely heavily upon these lifelines. Many small businesses, including concentrations of knitted goods and synthetic leather shoe manufacturers, suffered severe structural, equipment, and fire damage. However, in some instances, facilities were shut down despite the absence of structural damage. One striking example is Kobe University which sustained apparently no structural losses, but which, several days after the earthquake, had no definite plans to reopen; according to faculty members, the institution is devastated by the destruction of building contents, the lack of water and heat, and the deaths of many of its students.

Sources: personal observations in the disaster-affected region from January 19th to 24th; discussions with disaster victims; news reports; and statistical reference books.

Some of the material reported herein is based upon work supported in whole or in part by the National Science Foundation, tbe New York State Science and Technology Foundation, the U.S. Department of Transportation and other sponsors. Any opinions, findings, and conclusions or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of MCEER or its sponsors.