How do businesses in Japan survive disasters?
The New Year didn’t start well in the Land of the Rising Sun. A strong earthquake rocked central Japan. Thousands of people have been displaced, and the death toll appears to be gradually increasing.
However, this is not surprising given Japan’s status as one of the world’s most seismically active countries. It frequently makes headlines for disaster-related devastation, to the point where earthquakes have become a part of people’s lives. In fact, Japan has over 1,500 earthquakes per year that people can feel. And seismic activity is detected around once every five minutes. According to the BBC, people eventually become used to them.
Japan remains the world’s fourth largest economy. And it had one of the most outstanding per capita GDP growth rates between 2012 and 2019, coming in second only to the United States. Remember, these were the years immediately following the Great East Japan Earthquake, which killed over 20,000 people in 2011.
How Does Japan’s Economy Bounce Back From This?
Indeed, you could say Abenomics played a part. When Japan was beset by a crisis nearly 13 years ago, former Prime Minister Late Shinzo Abe intervened to limit the damage. He believed that Japan could achieve progress if he could get the various levers that power its economy to cooperate.
He coordinated fiscal, monetary, and structural reforms to achieve a single goal: growth. Debt interest rates were reduced in order to improve access to credit for individuals and enterprises alike. As a result, spending increased, demand climbed, and the economy improved.
Japan’s calamities and crises have taught it to stay on its toes. The country has made significant investments in catastrophe prevention and early warning systems. Since 1980, the government has invested approximately $6.4 billion per year in catastrophe preventive initiatives, including earthquake insurance for enterprises.
Furthermore, a significant amount of money is spent on revival and support initiatives. To begin, the Japanese government goes above and beyond its means to fund the majority of the costs associated with rebuilding enterprises in disaster-affected areas through taxation.
When a territory is hit by a natural disaster, businesses find it difficult to expand there again. As a result, incentives such as income and municipal tax deductions for lost assets can be beneficial. Real estate tax exemptions are granted to areas impacted by concurrent natural disasters, such as a tsunami.
As a result, businesses that invest in these affected areas to create office space and other infrastructure receive tax breaks and financial incentives.
These advantages extend to small and medium-sized businesses as well. As a result, businesses never hesitate to resume normal operations.
Businesses As Entities Have Survived For Centuries in Japan
Japan has about 52,000 firms that are more than a century old. They are also known as shinise, which translates to “old shops” in Japanese. For extra background, the country is home to the world’s oldest hotel, the Nishiyama Onsen Keiunkan, which opened in 705.
It also has the world’s oldest tea establishment, Tsuen Tea, which served its first brew in Tokyo in 1160. In addition, the world’s oldest corporation, Kongō Gumi, still operates in Japan. It is a construction enterprise that has been around for over 1,400 years and counting.
And these enterprises most likely lacked the level of crisis preparedness that modern governments have implemented. So, how did they even survive?
The secret may lay in the fact that most of these long-standing businesses have considered options other than profit generation.
Ichiwa, a little mochi (snack) shop started by a Japanese family in the year 1000, is a remarkable example of this. Even now, it serves toasted mochi, the only item on the menu, to visitors to the temple adjacent to which it operates. It clearly had numerous opportunities to grow its business. It might sell more products such as tea or biscuits. But Ichiwa never even considered them.
Here’s what the Bank of South Korea discovered about this behavior. Most Japanese companies that focused on their core industries were able to easily rebuild after calamities struck.
And that isn’t the only secret sauce. In challenging times, Japanese corporations are also more likely to invest in community rebuilding. It’s something they prefer over minimizing losses during a tragedy.
When the 2011 tragedy struck Japan, Lawson, one of the country’s most popular convenience stores, chose to give approximately 200,000 meals to sufferers. It might have simply shut down, keeping its employees safe while reducing costs. But this is not what it did.
Conclusion
That’s presumably why Japan’s firms stand out, even when their growth curve is frequently disrupted by disasters.
Is it time for global firms to take notes from Japan? Perhaps.
