The Earthquake Disaster and The Rising Yen

Oshita Saburo, company director, Indonesia


On the dawn of 28th May 1995, Neftegorsk was devastated by a strong earthquake of magnitude 7.6 that hit the north of Sakhalin, the far-eastern part of Russia. Indonesian National TV reported the death toll would reach at least two thousand. Less than six months after the Great Hanshin Earthquake, we faced another hell.

@The apartment blocks that had crumbled into pieces without a trace, speechless families standing still on a dusty road, an old mother who broke down crying "God, my son is dead" as she held the body wrapped in a tattered blanket. The scenes on the TV screen were just an infernal nightmare.

A sadder thing, however, was president Yeltsin's comment concerning help from
Japan. He said, "Russia has enough power to heal the wound of the earthquake on its own. Japan might ask for the islands (Japanese northern territory) as a reward for their help afterwards." This comment broke our hearts, when a lot of countries were about to start rescue operations to save people trapped under the rubble of collapsed buildings waiting to be rescued. We remember how warm we felt about the support from other countries through the experience of the Great Hanshin Earthquake. We wished Mr. Yeltsin would accept our helping hands without any reservation.

@According to reports in newspapers and other media, shelters have been built in the disaster area, the Shinkansen has resumed operation, restoration is on the way, and people seem to have regained hope. But in
Indonesia, I still can't recover from the aftermath of the disaster.

@There is a Chinese-managed restaurant which I always visited whenever I traveled to
Bandung from the Jakarta office of my company which I belonged to. I still visit it sometimes even now, since I have moved to Bandung. The Chinese manager, knowing that I'm from the disaster area, every time has added an extra free dish for me since the earthquake. I have asked him to stop it, but he wouldn't listen to me saying, "We help each other, because we have been friends for 27 years now." I sometimes bring some souvenirs. This style of relationship has continued since the earthquake.

@Chinese immigrants from mainland
China are under constant antagonism from native Indonesians. Whatever the matter is, when people's frustration explodes, the target is, without fail, Chinese people instead of the authorities. At these times, Chinatown will be devastated by a riot, and it becomes the victim of arson, destruction, and looting. These Chinese people who have survived such a history are perhaps able to feel what the heartache of earthquake victims is like. I appreciate the warm support of the owner of the restaurant.

@After the earthquake disaster, the Jakarta Japanese Society's individual members collected donations until February 17. These amount was equivalent to US$50,000. This contributions were sent to the Japan Red Cross under the name of the Jakarta Japan Club. Total donors amounted to 120 individuals and companies, excluding anonymous donors and donation boxes.

@The secondary effect of the disaster continues to be the cause of trouble to companies in
Indonesia, for both Japanese joint corporations and local companies. After the earthquake, Kobe port became unusable, and SGS which carries out export inspection was completely paralyzed, and transportation cargo to Yokohama port, the only port where export inspection could be made, was also impossible. An "LPS" (letter of inspection issued in the country of origin) which is required for export couldn't be issued, and cargo to be forwarded to Indonesia stopped at a disaster-hit warehouse at Kobe port.

@On March 6, some time after cargo ships came into
Kobe Port, SGS began operation, and shipment was planned between the end of March and the end of April. But at the time of the contract in October 1994, 1US$ was \101. On March 9 1995, it became \91.85, then \89.75 on March 28, and \83.95 on April 10. The yen had risen 20% higher than the exchange rate at the time of the contract. A company borrowed money from a bank to open an L/C, but due to financial shortage, they couldn't receive cargo at Jakarta port. Also there were many textile mills where machinery was left unrepaired after being received.

@The most miserable case was of a Japanese trading company which had secured an approximately \2.5 billion worth of export deals for a textile plant. Although shipment was delayed due to the earthquake, an L/C of a part of the textile machinery was opened, and the cargo was shipped to
Jakarta at the end of March. But the yen's rise caused a financial shortage, and the local side refused to receive the shipment. After a month, the cargo was sent back to Kobe port, and the cancellation of the contract became inevitable. This will lead to a huge loss, but this is just the tip of the iceberg.

@The cause of these cases is a drastic rise in the value of the yen, and the shipment would have been completed if it were not for the earthquake. A number of economists have pointed out that this exchange rate in favor of the yen was triggered by Prime Minister Murayama's poor measures taken after the earthquake.

@The next case is also related to a textile mill. A Japanese major synthetic fiber manufacturer had been fixing additional machinery to augment the production of polyester fiber since the end of 1994. Immediately after the final set of machinery had arrived in
Kobe port, the earthquake hit Kobe, and the machinery had to be left in a warehouse for nearly 2 months. If the machinery had been shipped according to the original schedule, the mill could have started production in the middle of May 1995. They had an order from a textile factory starting from June, but they couldn't supply the fiber. Currently all the salesmen have become busy trying to save this situation, offering other factories' fiber and importing fiber from the company's other factory in South-East Asia.

@As I have already mentioned, the inability of the government to act was the major cause of the dramatic rise of the yen immediately after the earthquake, as a lot of economists confirm. Not to mention our dwindling salaries, to us representatives of Japanese firms the Great Hanshin Earthquake's damage was indeed enormous.



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