JDR Vol.15 No.5 pp. 633-644
doi: 10.20965/jdr.2020.p0633


Estimating the Nankai Trough Megathrust Earthquake’s Anticipated Fiscal Impact on Japanese Governments

Takeshi Miyazaki* and Shingo Nagamatsu**,***,†

*School of Economics, Kyushu University
744 Motooka, Nishi-ku, Fukuoka 819-0395, Japan

**Disaster Resilience Research Division, National Research Institute for Earth Science and Disaster Resilience (NIED), Ibaraki, Japan

***Faculty of Societal Safety Science, Kansai University, Osaka, Japan

Corresponding author

October 17, 2019
May 25, 2020
August 1, 2020
fiscal risk, disaster-related contingent liability, disaster recovery, Nankai Trough Megathrust Earthquake, Great East Japan Earthquake

This study estimates the fiscal impact of the anticipated Nankai Trough Megathrust Earthquake on both the national and local Japanese governments to identify their sovereign risk. First, we estimate the impact of the Great East Japan Earthquake on local public finance using panel data regressions on 2008–2015 fiscal data. Second, based on the anticipated damage data – seismic intensity and area of inundation – of the Nankai earthquake and the coefficients derived from the first step, we estimate the amounts of fiscal revenue and expenditures that would be required by every local government for the anticipated Nankai earthquake. Finally, we estimate the fiscal expenditure of the national government in proportion to the estimated local ones. We find that first, the estimated fiscal requirements in the two years after the earthquake are about JPY 161 trillion, 5.9 times those of the 2011 Great East Japan Earthquake. Second, the financial disparity between affected and non-affected local governments is large because the Nankai earthquake would affect more municipalities than the Great East Japan Earthquake. The fiscal burden of non-affected municipalities would be relatively higher. These findings indicate that the Nankai earthquake will not only be a local disaster but also a national catastrophe.

Cite this article as:
T. Miyazaki and S. Nagamatsu, “Estimating the Nankai Trough Megathrust Earthquake’s Anticipated Fiscal Impact on Japanese Governments,” J. Disaster Res., Vol.15, No.5, pp. 633-644, 2020.
Data files:
  1. [1] K. J. Arrow and R. C. Lind, “Uncertainty and the evaluation of public decisions,” Am. Econ. Rev., Vol.60, No.3, pp. 364-378, 1970.
  2. [2] F. Ghesquiere and O. Mahul, “Sovereign natural disaster insurance for developing countries: a paradigm shift in catastrophe risk financing,” World Bank Policy Research Working Paper Series No.4345, 2007.
  3. [3] T.-L. Teh, “Sovereign disaster risk financing and insurance impact appraisal,” Br. Actuarial J., Vol.20, No.2, pp. 241-256, 2015.
  4. [4] O. D. Cardona, M. G. Ordaz, M. C. Marulanda, and A. H. Barbat, “Fiscal impact of future earthquakes and country’s economic resilience evaluation using the disaster deficit index,” Proc. 14th World Conf. on Earthquake Engineering, 2008.
  5. [5] O. D. Cardona, M. G. Ordaz, M. C. Marulanda, M. L. Carreño, and A. H. Barbat, “Disaster risk from a macroeconomic perspective: a metric for fiscal vulnerability evaluation,” Disasters, Vol.34, No.4, pp. 1064-1083, 2010.
  6. [6] V. Cardenas, S. Hochrainer, R. Mechler, G. Pflug, and J. Linnerooth-Bayer, “Sovereign financial disaster risk management: The case of Mexico,” Env. Hazards, Vol.7, No.1, pp. 40-53, 2007.
  7. [7] D. Bevan and S. J. Cook, “Public expenditure following disasters,” World Bank Policy Research Working Paper Series No.7355, 2015.
  8. [8] C. Gamper, B. Signer, L. Alton, and M. Petrie, “Managing disaster-related contingent liabilities in public finance frameworks,” OECD working papers on Public Governance No.27, 2017.
  9. [9] M. Sato and T. Miyazaki, “Risk sharing among governments and public finance for recovery from Great Eastern Japan Earthquake disaster,” Financ. Rev. 2012, pp. 30-53, 2012 (in Japanese).
  10. [10] Reconstruction Design Council, “Towards Reconstruction: Hope beyond the Disaster,” 2011.
  11. [11] P. Matanle, “Post-disaster recovery in ageing and declining communities: the Great East Japan disaster of 11 March 2011,” Geogr., Vol.98, No.2, pp. 68-76, 2013.
  12. [12] A. Cho, “Post-tsunami recovery and reconstruction: governance issues and implications of the Great East Japan Earthquake,” Disasters, Vol.38 No.s2, pp. 157-178, 2014.
  13. [13] Ministry of Internal Affairs and Communications (MIC), “Settlement of Municipality Finances,” 2008-2012 (in Japanese).
  14. [14] Ministry of Internal Affairs and Communications (MIC), “Settlement of Prefecture Finances,” 2008-2012 (in Japanese).

*This site is desgined based on HTML5 and CSS3 for modern browsers, e.g. Chrome, Firefox, Safari, Edge, Opera.

Last updated on Sep. 24, 2020