The Nikkei closed up 3.7% on Tuesday after giving up 3.4% the day before as a result of the impact of the twin earthquakes in Kyushu. So we're left in a situation where the market is actually better off than before the disaster.
The 7.0 magnitude quake on Saturday, coming after a smaller one on Thursday, at last count has killed 45 people in Kumamoto prefecture. That is the industrial heartland of Japan's southernmost main island and a major semiconductor and auto-parts producer. Rescue efforts continue amid strong aftershocks.
Kyushu Electric Power, the most interesting stock to watch, gained 2.6% on Tuesday after taking a plunge of 8.4% the day before.
Only one nuclear power plant out of the 42 in Japan is operating, and it belongs to this company; it is situated in Sendai, to the southwest of the quake site. "Under the current circumstances, we do not see any safety problem," Shunichi Tanaka, the chairman of Japan's nuclear regulator, said. But since there has been aftershock after aftershock, the agency is going to reassess.
I said yesterday that any downturn in Japanese stocks as a result of the twin earthquakes would be short-lived. I'm not sure that I meant the market would be higher than its Monday open the very next day, but some part of me is glad. Many companies have expressed their deepest and most heart-felt sympathy for those affected.
The investment bank Nomura (NMR) was the latest to do so in a report that landed in my inbox this morning. It breaks out the scope of the disaster in economic terms. Kumamoto prefecture accounts for 1.1% of Japan's gross domestic product. Neighboring Oita, also hit hard, makes up another 0.9%. Throw in Fukuoka prefecture, which wasn't affected directly but is home to the island's largest city, and the three prefectures account for 5.6% of Japan's economy. They are home to 8 million people.
The March 2011 earthquake in northeastern Japan was of a totally different scale. It unleashed a tidal wave and ultimately killed 15,894 people, causing ¥17 trillion ($160 billion) in damage. Nomura notes that this quake is similar in size to the 7.2 magnitude Great Hanshin earthquake in 1995, which was also much more deadly (body count: 6,308) but caused ¥3 trillion ($30 billion) in damage.
Of course, the 2011 quake and tsunami resulted in a nuclear explosion and botched efforts of containment at the Fukushima Dai-ichi power plant run by Tokyo Electric Power, better known as TEPCO. The company suffered reputational damage that will be hard to ever overcome.
This time around, a group of writers has said Kyushu Electric should immediately suspend operations of the Sendai nuclear plant, before any nasty surprise. Tanaka at the nuclear regulator has admitted the agency may not have been quick enough in providing information on the situation.
"Japan Inc." is often slow and lacking in response to negative events. But Toyota (TM), Honda (HMC), Sony (SNE) and the like have been all over the Kumamoto disaster. They immediately put out press releases, including ones in English such as this from Honda, outlining their assessment of damage and what operations they were suspending.
After such a display of transparency, it's no surprise to see Toyota's shares rebound 3.9% in Tokyo trade on Tuesday. That's still below the pre-quake level, but only just. Honda bounced 4.5% and is already above the pre-quake close. Sony's fall (6.8%) and rise (6.5%) has been the most dramatic of the three.
Honda's Kumamoto factory is its largest domestic plant, mainly making motorcycles. It is suspended until April 22 and even then the company needs to make a call on the structure and whether it can supply the factory with components.
The vast amount of the damage in the 2011 disaster was caused by the tsunami rather than the quake. I remember watching with horror as the disaster unfurled mid-morning on NHK and BBC World. An oozing monster of black mud and debris pursued and then overtook cars on rural roads. I can only imagine the worst came of those inside; BBC didn't broadcast such images again. Another indelible image is of truckers standing atop their big rigs as the mire flowed around them.
There was no tsunami this time, and while there's no clear picture of the full impact of the disaster yet, it will be a far cry from that of 2011. Back then, expatriates were sending their families back home, fearful nuclear fallout would reach Tokyo, and some companies were considering pulling out of Japan altogether. "We've stuck with you through two decades of deflation and economic underperformance, and now we're going to get nuked?!"
As a demonstration of how resilient Japan is in the face of quakes, the Kumamoto airport has already resumed limited service, with the first flight in four days landing on Tuesday morning. The terminal may be closed due to quake damage, and passengers may have to be given their luggage in the parking lot, but life goes on in the most seismically active country on the planet. In all, 18 flights were due to land today.
The first flight brought in 38 supply-laden passengers aboard All Nippon Airways, which has supplanted Japan Airlines as the country's largest carrier. Expect little to no disruption in the airline stocks. They have had near-identical trajectories. ANA fell 2.9% on Monday, and bounced 1.9% on Tuesday. JAL lost 2.5%, then gained 2.0%.
In a painful piece of irony, a 51-year-old woman died of "economy-class syndrome" in Kumamoto because of a blocked artery in her lungs, likely due to a deep-vein thrombosis as a result of sleeping in her car after the quake.
Tourism spending in Kyushu amounts to around ¥580 billion ($5.3 billion) annually. Even if the number of travelers fell by a third for six months, Nomura figures the direct impact would be a loss of ¥87 billion ($800 million), knocking 0.2% off Japan's economy.
The Tokyo market sold off 10.6% after the March 2011 quake and didn't recover for almost two years. It clawed above that level in January 2013. There was a very specific reason for it to recover at that point: current Prime Minister Shinzo Abe was elected in mid-December 2012.
With the quake largely behind us in market terms, Abenomics and his efforts to force Japan into inflation and growth once again become the focus for traders.