Economic Impacts of Climate Change and Environmental Risks (YAGI Michiyuki, MANAGI Shunsuke)
Impacts of the COVID-19 Pandemic on People’s Lives and Health (SATO Koryu)
Assumption Difficulty and Corporate Disaster Preparedness (NAKATA Hiroyuki, IZUMI Yutaro)
Cascading Financial Crises and Policy Prescriptions (KIHARA Takashi)
Trade Conflicts (NOSE Manabu, SAWADA Yasuyuki)
GVC and Resilience (KUROISHI Yusuke, NAKAJIMA Kentaro, TAKAYASU Yutaro, TANAKA Mari)
Economic Security and Supply Chain Resilience
―Policy Implications for Japan Based on Theoretical and Empirical Research― (TODO Yasuyuki)
Conflict (KITAMURA Shuhei)
Disaster Resilience and Sustainable Development (SAWADA Yasuyuki)
| By YAGI Michiyuki MANAGI Shunsuke |
(Professor, Faculty of Economics, University of Toyama) (Distinguished Professor, Urban Institute, Kyushu University) |
Climate change has long-term impacts on the economy and society through increases in climate extremes (extreme weather and climate events), sea-level rise, and the degradation of natural capital. In addition, multi-hazard events—in which environmental pollution, natural disasters, conflicts, and infectious diseases co-occur and mutually amplify—manifest as shocks to demand, supply, and assets through exposure and vulnerability, and heighten systemic risk through interdependencies in supply chains and finance. This paper presents a framework for sequentially evaluating the economic effects of shocks using the chain “shock – GDP (flow) – Inclusive Wealth Index (IWI; produced, human, and natural capital stocks).” Even if nominal GDP temporarily increases, growth potential and well-being can still decline if damage to capital stocks persists. Disaggregating these indicators into small spatial units such as municipalities or grid cells enables the framework to identify vulnerable areas, prioritize investment, and assess efficiency and equity across generations and regions. This enables parallel evaluation of flows and stocks and allows measurement of real resilience. The policy domains examined, with attention to both flows and stocks, are carbon pricing, disaster risk reduction and adaptation, supply chain resilience, and international governance and information disclosure.
Keywords: climate change, environmental risks, Inclusive Wealth Index, systemic risk, economic spillover effects, resilience
JEL Classification:Q54, Q56, H23
| By SATO Koryu | (Assistant Professor, Faculty of Policy Management, Keio University) |
This paper examines the impacts of the COVID-19 pandemic on people’s lives and health across three life stages: infants and young children, the working-age population, and older adults. In addition to a review of existing literature, it uses empirical analysis based on municipal survey data from Japan and user data from an AI health application to clarify key patterns and policy implications.
For infants and young children, children who had experienced the pandemic by age five showed, on average, developmental delays of more than four months compared with those who had not. No negative association with the pandemic was observed for development at age three. Regardless of age, variation in development across children and across nursery centers widened during the pandemic, with particularly pronounced disparities in social relationships with adults. While the quality of care at nursery centers was positively associated with development, parental depressive symptoms amplified the association between the pandemic and developmental delays.
Among the working-age population, average weekday step counts declined by more than 1,100 steps during the first declaration of a state of emergency. Both reduced physical activity and longer working hours were positively associated with the risk of depressive symptoms. By contrast, individuals who newly began working from home during the pandemic showed a lower risk of depressive symptoms. Changes in dietary behavior indicate that the state of emergency and working from home were associated with increased intake of vegetables, suggesting an overall improvement in diet quality. However, these factors were also associated with increased consumption of snacks. Increased childcare time and depressive symptoms were associated with reduced intake of vegetables and fruit.
For older adults, individuals and communities with high levels of social capital prior to the pandemic exhibited a lower risk of developing depressive symptoms during the pandemic. This association remained consistent even after adjusting for changes in social capital during the pandemic.
Overall, the pandemic had negative impacts on adult mental health and children’s development, but the magnitude of these effects varied depending on socioeconomic conditions and environment. Governments and local authorities need to identify vulnerable groups such as families with children, nonregular workers and the unemployed, and older adults, and prioritize measures including childcare and education support, employment and income protection, and countermeasures against isolation and loneliness. Because many aspects of the long-term impact of the pandemic remain unclear, the development of longitudinal data infrastructure spanning the pre- and post-pandemic periods is essential. Furthermore, international sharing of experiences and data across countries and coordinated improvement of education, labor, and eldercare policies during pandemics are indispensable for strengthening global resilience against future emerging infectious diseases.
Keywords: COVID-19 pandemic, early childhood development, depressive symptoms, diet, social capital
JEL Classification: I14, I18, J13, J81
| By NAKATA Hiroyuki IZUMI Yutaro |
(Professor, Graduate School of Frontier Sciences, The University of Tokyo) (Associate Professor, National Graduate Institute for Policy Studies) |
This paper analyzes the effectiveness of countermeasures for various types and scales of disasters using original microdata. It shows that subjective evaluations of the effectiveness of property insurance, commercial lending, public lending, and public subsidies exhibit opposite relationships between earthquakes, which are difficult to anticipate, and wind and flood damage, which are comparatively easier to anticipate. By contrast, business interruption insurance receives low evaluations for all disaster types. A similar inverse relationship is observed between catastrophic disasters that are difficult to anticipate and other disasters that are relatively easier to anticipate, suggesting that perceived effectiveness of countermeasures is strongly influenced by the degree of difficulty in anticipating disasters. Property insurance is primarily fire insurance. While coverage for earthquakes and floods is typically provided through optional riders, coverage for wind damage is included in standard contracts, which likely amplifies the effect of anticipation difficulty. In addition, the formulation of a Business Continuity Plan (BCP) helps avoid suspension of operations regardless of disaster type. By contrast, establishments that had purchased flood insurance were more likely to suspend operations, suggesting the presence of adverse selection.
Keywords: Business Continuity Plan (BCP), anticipation difficulty, incomplete contracts, insurance
JEL Classification:D22, D81, D83, G22, G32
| By KIHARA Takashi | (Councillor, NIRA) |
This paper examines the chain of financial crises occurring frequently across countries, including banking, currency, sovereign default, and debt restructuring crises, and tests their economic effects using Granger causality tests and panel analyses (VAR, Probit, fixed-effects models, etc.). The results indicate a high probability of a cascading sequence in which increases in public and external debt in financial centers such as the United States, together with expansions in public and external debt and bank credit in other countries following financial turmoil, lead to a progression from a banking crisis to a currency crisis, then to a sovereign default crisis, and finally to a debt restructuring crisis.
The study further finds that maintaining sound fiscal conditions (fiscal space) is important for preventing and enabling early recovery from a banking crisis, which can trigger such cascading crises. By contrast, maintaining high policy interest rates (monetary space), including central bank policy rates, may instead induce crises and delay recovery. The paper also introduces a dynamic general equilibrium model in which the financial accelerator and embodied technological change magnify and prolong banking crises. As a case study, it examines Sri Lanka, which fell into a sovereign default crisis for the first time in 2022, and shows that deteriorating fiscal conditions and rapid expansion of bank credit can worsen financial crises. Securing fiscal space and deepening securities markets to complement the banking sector are therefore critically important for avoiding crises and enabling rapid recovery.
Keywords: financial crises, crisis contagion, sovereign default, fiscal space, securities markets, Sri Lanka
JEL Classification: E51, E62, F34, F44, G15
| By NOSE Manabu SAWADA Yasuyuki |
(Associate Professor, Faculty of Economics, Keio University) (Professor, Graduate School of Economics, The University of Tokyo) |
Despite steady growth, the U.S.–China trade conflict has heightened downside risks for developing Asia. Building on recent literature, this article examines how trade policy uncertainty has affected regional investment and growth, focusing on trade diversion toward third countries and the reorganization of global value chains through foreign direct investment (FDI). Using Vietnamese transaction-level customs data with the enterprise census, we find that while the U.S.–China tariff shock created new export opportunities, it simultaneously deepened Vietnam’s dependence on Chinese intermediate imports. Growth gains were concentrated in metropolitan areas and foreign-owned firms, underscoring the critical role of infrastructure and industrial policy in absorbing external shocks. The findings suggest that converting external shocks into sustained and inclusive growth requires strengthening domestic supplier integration and attracting high-quality FDI.
More broadly, these dynamics illustrate a shift toward “managed interdependence”, where supply chain resilience is prioritized over traditional cost-efficiency. As trade conflicts evolve from bilateral disputes into complex geoeconomic challenges involving the Global South, navigating this landscape requires a transition toward multilateral coordination. Addressing the intricate intersection of trade, investment, and security across borders highlights the need for further advances in the field of geoeconomics.
Keywords:U.S.–China trade conflict, trade, foreign direct investment, customs declaration data, developing Asian economies
JEL Classification:R40, R41, F10, F13, F14, O18, O53
| By KUROISHI Yusuke NAKAJIMA Kentaro TAKAYASU Yutaro TANAKA Mari |
(Graduate School of Economics, Hitotsubashi University) (Professor, Graduate School of Business Administration, Hitotsubashi University) (Project Research Associate, Graduate School of Economics, The University of Tokyo) (Associate Professor, Division of Economics, Graduate School, The University of Tokyo/ Associate Professor, Institute of Economic Research Research Division of Economic Institutions and Policy, Hitotsubashi University) |
This paper examines how large-scale shocks affect global value chains (GVCs) and trade networks, with a particular focus on the resilience of Japanese firms. Motivated by recent disruptions such as the COVID-19 pandemic and Russia’s invasion of Ukraine, we highlight growing concerns about supply chain vulnerabilities and the limited empirical evidence on how firms reorganize their trading relationships in response to such shocks. Using firm-level Japanese customs transaction data from 2017 to 2022, we document systematic changes in firms’ trade networks.
Our analysis shows that amid heightened economic and geopolitical risks, Japanese firms have reduced the number of trading partner countries and product varieties, increasingly concentrating transactions on a smaller set of partners. This “selection and concentration” strategy potentially raises the risk of severe disruptions when networks are severed. At the same time, however, firms have strengthened long-term relationships with continuing partners, which indicates a deliberate shift toward more stable and relationship-based sourcing strategies. These findings suggest that firms are not passively exposed to shocks but actively adopt risk-mitigation strategies that balance efficiency and resilience.
By combining a comprehensive review of the GVC literature with new micro-level evidence, this paper provides quantitative insights into the recent reorganization of Japanese trade networks. The results offer important implications for economic security, trade policy, and the design of resilient supply chains in an increasingly uncertain global environment.
Keywords: GVC, trade networks, supply chain resilience, customs transaction data
JEL Classification: D22, F14, L25
| By TODO Yasuyuki | (Professor, Faculty of Political Science and Economics, Waseda University) |
In recent years, global supply chains have been disrupted not only by natural disasters but also by human-driven geopolitical and security tensions, protectionist policy responses, and economic coercion. Under these conditions, ensuring supply chain resilience and strengthening economic security have become major concerns for researchers, policymakers, and, above all, business actors. This study reviews rapidly developing theoretical and empirical research on supply chain resilience and industrial policy and, on that basis, presents policy implications from Japan’s perspective.
Key approaches to strengthening supply chain resilience include friendshoring, which diversifies transactions toward trusted partner countries, and onshoring, which relocates production domestically. For effective friendshoring, governments can play a useful role by providing firms with information on overseas risks and markets. Looking ahead, Japan will also need to expand supply chains into countries of the Global South. This requires not only the collection of country-level risk information but also the development of mutually beneficial relationships through infrastructure development, technological cooperation, and the creation of new international frameworks addressing environmental and human rights issues. Effective onshoring calls for industrial policies that are competitive and open and that promote the formation of supply chains and knowledge networks. In particular, it is desirable to pursue international joint research with a diverse range of trusted partner countries in conjunction with outward investment. Finally, the study emphasizes that various forms of multilateral cooperation are important for enhancing the effectiveness of these policies.
Keywords: economic security, supply chains, resilience, economic coercion, industrial policy
JEL Classification: F1, F5
| By KITAMURA Shuhei | (Associate Professor, The Institute of Social and Economic Research, Osaka University) |
This paper organizes the determinants of conflict from an economics-centered perspective. In addition to the rapacity effect on resources and the opportunity-cost effect on labor-market opportunities, it broadly examines a range of factors identified by empirical research, including state capacity, ethnic fragmentation, media, and climate change. Finally, it discusses potential strategies for reducing conflict.
Keywords: conflict, economic development
JEL Classification: D74, O10
| By SAWADA Yasuyuki | (Professor, Graduate School of Economics, The University of Tokyo) |
This paper analyzes the interdependent relationships among climate change, development, and disasters in Asia and presents a policy framework centered on strengthening resilience as disaster recovery capacity. Against the backdrop of rising environmental pressures and intensifying disaster risk associated with rapid industrialization and urbanization, climate policy is framed around two pillars, mitigation and adaptation, with adaptation in particular positioned as a response to the following four categories of megadisasters: disasters triggered by natural hazards, technological disasters, economic crises, and violent conflict. By identifying trends in the occurrence of these disasters based on data and comparing how market-based and non-market insurance mechanisms function, the paper identifies weaknesses in market mechanisms in responding to economic crises while confirming the complementary role of non-market insurance. As policy implications, it proposes expanding market-based risk transfer, developing streamlined public disaster-response systems that explicitly specify hazard, exposure, and vulnerability, complementing insurance functions through social capital and community mechanisms, and promoting international policy coordination centered on resilience. It further argues that strengthening resilience to compound disasters, while achieving decarbonized and inclusive growth, will require expanded green and social finance, deeper local-currency bond markets, sovereign debt restructuring, particularly obligations to China, and stronger domestic resource mobilization.
Keywords: sustainable development, climate change, natural hazards, technological disasters, economic crises, violent conflict, insurance
JEL Classification: Q01, Q54, O33, G01, D74
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