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Law and Policy Responses to Disaster-Induced Financial Distress

The Tsunami Victims of 3/11

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Governance, Risk and Financial Impact of Mega Disasters


This chapter treats disaster response policies directed at the economic recovery of private households. First, we examine problems of disaster-induced financial distress from a legal and economic perspective. We do this both qualitatively and quantitatively, and focussing on residential loans, using the victims of the 11 March 2011 tsunami as our example. Then, using doctrinal and systematic analysis, we set out the broad array of law and policy solutions tackling disaster-induced debt launched by the Japanese Government. On this basis, we assess the strengths and weaknesses of these measures in terms of their practical adequacy to prevent and mitigate financial hardship and examine them against multiple dimensions of disaster justice. We conclude with suggestions for improving financial disaster recovery by taking a prospective approach, preventing the snowballing of disaster-related losses, which we argue represents a equitable and effective way forward in allocating resources following future mega disasters.

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  1. 1.

    For an overview of the 3/11 disaster from the perspective of the natural sciences, see e.g. Satake (2014); from the social sciences, see e.g. Gill et al. (2013a), Kingston (2013, pp. 198–220); from socio-legal studies, see the contributions in Butt et al. (2014).

  2. 2.

    See e.g. Economist (2011), see also Ranghieri and Ishiwatari (2014).

  3. 3.

    Three days into the catastrophe, the number of displaced had peaked at almost half a million people. Out of this group, 300,000 evacuees remained in temporary housing well into 2013, of which less than 100,000 remained in 2016, see Kozuka (2012, p. 4), Japan Times (2012, 2013), Ueda and Shaw (2014, pp. 210–211).

  4. 4.

    See e.g. Dôjima hôritsu jimu-sho [Dôjima Law Office] (2011, p. 126).

  5. 5.

    See also Cho (2014, p. 171).

  6. 6.

    See Steele and Jin (2012, pp. 47–48).

  7. 7.

    Prime Minister Naoto Kan, as cited by Shozaburo Jimi, Minister of Financial Services, see Financial Services Agency (2011b).

  8. 8.

    Indeed, some Japanese commentators point out that the issue has not been fully grasped even in Japan. For the few brief mentions in western languages, see Kabashima (2012, pp. 13–15); otherwise only Wakabayashi et al. (2011) (two paragraphs); Umeda (2013, pp. 18–19) (one paragraph); Cho (2014, p. 171) (one paragraph); and a box in Ranghieri and Ishiwatari (2014, pp. 274–275). Through the lens of insolvency law, guidelines stipulated for out-of-court settlements with double-loan victims have been analysed in detail by Steele and Jin (2012). For a first overview in Japanese, see Adachi (2011). However, these procedures constitute merely one of the regulatory responses, unfortunately unsuccessful in practice, leaving the crisis largely unresolved.

  9. 9.

    Elsewhere, we examine the related problems of homelessness, the provision of housing, and the resulting questions of disaster justice in greater detail: Weitzdörfer and Beard (forthcoming 2020).

  10. 10.

    On Japan, see Hirayama and Hayakawa (1995, p. 230), Hirayama (2010); similar problems occurred, for example, in New Orleans in the wake of Hurricane Katrina, although not referred to with a special term.

  11. 11.

    While a new home is said to cost the equivalent of three years’ salary in the USA, the figure is five to eight years in Japan; see also generally Hirayama and Hayakawa (1995, p. 215).

  12. 12.

    See generally Gill et al. (2013b, pp. 9–11), Godzik (2013), Ueda and Shaw (2014).

  13. 13.

    See e.g. Cho (2014, p. 170).

  14. 14.

    See e.g. Ranghieri and Ishiwatari (2014, p. 274), JFBA (2011c).

  15. 15.

    See also Hirayama (2010).

  16. 16.

    See also Japan Press Weekly (2011b), Wakabayashi et al. (2011).

  17. 17.

    See also the detailed qualitative and quantitative analyses of the resulting problems and solutions for regional financial institutions by Torihata (2012, pp. 201–207), Uchida et al. (2012), using company- and bank-level micro-data.

  18. 18.

    E.g. Leflar et al. (2012, p. 77), where double-loans are listed as two out of nine major concerns.

  19. 19.

    Higashi-nihon dai-shinsai no hisai-sha ni tai suru enjo no tame no nihon shihô shi’en sentâ no gyômu no tokurei ni kan suru hôritsu.

  20. 20.

    See also Financial Services Agency (2011d).

  21. 21.

    For evidence of thousands of consultations on loans in Iwate Prefecture, see also Fig. 5 in Okamoto (2012, p. 58).

  22. 22.

    This is not only due to their limited time-frame, as specific inquiries about public benefits and relief for home-owners may have been attributed to the share of consultations on “laws and regulations.” In addition, a large proportion of the cases is likely not among those surveyed by the JFBA.

  23. 23.

    See Ohira and Chiba (2011).

  24. 24.

    See Kozuka (2012, pp. 7–8), Financial Services Agency (2011b).

  25. 25.

    Though most elderly Japanese have high savings, according to national statistics of the same year, 53.5% of workers' households were in debt, see Ministry of Internal Affairs and Communications, Statistics Bureau (2013, p. 149). Hence, the number of evacuees suffering from pre-disaster debt may have been as high as 100,000.

  26. 26.

    This is an unsourced estimation cited from Wakabayashi et al. (2011).

  27. 27.

    As these rural homes likely house more than the national average of 2.5 people, Ministry of Internal Affairs and Communications, Statistics Bureau (2013, p. 13).

  28. 28.

    Implying a functional definition relying on a more literal and thus wider definition of “homelessness” than the one used by the Government.

  29. 29.

    Okamoto and Bretherton (2012) cite government figures suggesting that in Japan’s major cities, 16,000 people “sleep rough.” For a different number of 25,000 and various categories of homelessness, see Iwata (2007, pp. 142–144); more broadly on the ways of social exclusion of the poor in contemporary Japan, see Iwata and Nishizawa (2008).

  30. 30.

    See e.g. Mainichi Daily News (2011).

  31. 31.

    Risoku seigen-hô.

  32. 32.

    Shusshi no ukeire, azukari-kin oyobi kinri-tô no torishimari ni kansuru hôritsu.

  33. 33.


  34. 34.

    See Dôshita (2012, p. 5). Inter alia, such activities may constitute violations of Article 16 para 2 Nos. 2, 4 of the Money Lending Business Act, which ban solicitations that target persons lacking repayment capacity and that induce recipients of public benefits to borrow.

  35. 35.

    See also Mainichi Daily News (2011).

  36. 36.

    See Hirayama (2000, pp. 117–118), Johnson (2007, p. 445).

  37. 37.

    For examples, see Wakabayashi et al. (2011).

  38. 38.

    On the Government's legislative, organisational, administrative, and fiscal responses, see generally Inaba (2011); and in English, Umeda (2013).

  39. 39.

    Based on interviews at home, with 1,598 out of 1,650 responding. The rate of disaster victims encountering legal problems went up by 14% in comparison with 2008.

  40. 40.

    See the timeline and list in Government of Japan, Cabinet Office (2011a, pp. 4–7).

  41. 41.

    See Inaba (2011, p. 25) for numerous examples and further references.

  42. 42.

    See also Feldman (2013), Kawamura (2017).

  43. 43.

    Dôjima hôritsu jimu-sho [Dôjima Law Office] (2011, p. 128).

  44. 44.

    This overview is not exhaustive; see Weitzdörfer and Beard (forthcoming 2018) for more detail.

  45. 45.

    See also Dôjima hôritsu jimu-sho [Dôjima Law Office] (2011, pp. 116–119).

  46. 46.

    It has now expired.

  47. 47.

    Such penalties are significant, as they may be as high as 40% of the principal, or twice the maximum annual interest, Article 4 para 1 of the Interest Limitation Act. Institutions might have similarly waived contractual rights to demand immediate repair of damaged real property from mortgagees.

  48. 48.

    Serving predominantly local corporations, individuals, and public sector bodies, these 41 institutions offered long-term actual interest rates as low as 2.5 and 2.0% on average in 2011 and 2012. The Shinkin banks, a total of 270 co-operative regional financial institutions, primarily serving SMEs and local residents, operated at similarly moderate rates of 2.8 and 2.4%, respectively, see OECD (2013).

  49. 49.

    See also Ohira and Chiba (2011), Ranghieri and Ishiwatari (2014, p. 275).

  50. 50.

    See also Dôjima hôritsu jimu-sho [Dôjima Law Office] (2011, pp. 127–128).

  51. 51.

    To those unfamiliar with politics in Japan, it should be remarked that the LDP’s name is potentially misleading, as it is neither very liberal (rather interventionist and conservative), nor democratic to the bone (rather relying on top-down decisions), nor a “party” in the European sense (rather its factions compete for power within). On differences in the crisis-management by the DPJ and the LDP, see generally Krauss (2013).

  52. 52.

    Nijû rôn kyûsai- or Higashi-nihon dai-shinsai jigyô-sha saisei shi’en kikô-; see Claremont (2014, p. 86, p. 96) on how political tensions in the National Diet impeded relief efforts.

  53. 53.

    For a comparison, see e.g. JFBA (2012a, p. 31).

  54. 54.

    See also Kabashima (2012, p. 13).

  55. 55.

    See Ando et al. (2013, p. 9).

  56. 56.

    See e.g. Ranghieri and Ishiwatari (2014, p. 275).

  57. 57.

    For critical remarks, see Part 3.6(c).

  58. 58.

    For a detailed description and a translation, see Steele and Jin (2012); in Japanese, see Adachi (2011).

  59. 59.

    For practical advice, see Dôjima hôritsu jimu-sho [Dôjima Law Office] (2011, pp. 115–142).

  60. 60.

    For their role in relation to the disaster, see generally Dôjima hôritsu jimu-sho [Dôjima Law Office] (2011, pp. 143–185), Katô (2013).

  61. 61.

    See also Kabashima (2012, pp. 14–15).

  62. 62.

    See also Kabashima (2012, p. 14).

  63. 63.

    See Japan Times (2013).

  64. 64.

    See also Adachi (2011, p. 9).

  65. 65.

    See Steele and Jin (2012, p. 44, pp. 66–68), Katô (2013).

  66. 66.

    See e.g. JFBA (2012b) (updated regularly).

  67. 67.

    See JFBA (2012a, p. 28).

  68. 68.

    The prefectural figures mirror Miyagi as the most affected prefecture, with two thirds of the filings, followed by Iwate with one fourth. Cho (2014, p. 171) is apparently confusing the number of applications with mere inquiries.

  69. 69.

    Accordingly, Article 13 et seq. of the Money Lending Business Act imposed a duty on lenders to assess the financial situation of prospective borrowers, banned loans leading to indebtedness disproportionate in relation to the borrower’s income, and imposed fines and up to one year of imprisonment upon violation in Article 48 et seq. of the act, see e.g. Kozuka and Nottage (2007) and Weitzdörfer (forthcoming).

  70. 70.

    See Ohira and Chiba (2011), Japan Press Weekly (2011a).

  71. 71.

    Kashikin gyôhô shikkô kisoku, as amended by Cabinet Ordinance No. 35/2011; Mainichi Daily News (2011); on the earlier laws, see Shimizu (2007, pp. 189–220).

  72. 72.

    For a summary of the amendments, see Financial Services Agency (2011a).

  73. 73.

    See Japan Times (2011).

  74. 74.

    Gyôsei tetsuzuki-; the quotation is from Japan Press Weekly (2011a).

  75. 75.

    On the role of donations, see Aota (2011).

  76. 76.


  77. 77.

    Saigai chô’i-kin no shikyû-tô ni kansuru hôritsu.

  78. 78.


  79. 79.

    See generally Tsukui (2011).

  80. 80.

    For details, see Brasor and Tsubuku (2011).

  81. 81.

    According to the results of a comparative study of housing-problems after six earthquakes world-wide, renters generally “cannot afford the increase in market rents after the disaster and do not qualify for the permanent-housing subsidies aimed at homeowners” Johnson (2007, p. 454). For critical remarks, see Part 3.6(e).

  82. 82.

    Bôsai no tame no shûdan iten sokushin jigyô ni kakawaru kuni no zaisei-jô no tokubetsu sochi-tô ni kansuru hôritsu; on the specific subsidies in Sendai, see Kabashima (2012, p. 11).

  83. 83.

    For criticism, however, see Kabashima (2012, p. 11, p. 15).

  84. 84.

    See Torihata (2012, pp. 195–200) on further aspects of these problems in Miyagi and Iwate Prefectures.

  85. 85.

    For details, see Kabashima (2012, pp. 10–11, pp. 13–14).

  86. 86.

    See also Claremont (2014, p. 96).

  87. 87.

    Or metaphorically put: “The people who really need to move now are the politicians and administrators who hold the purse strings for aid,” Wilhelm and Delaney (2013, p. 122).

  88. 88.

    Saigai kyûjo-; see Umeda (2013, pp. 6–7).

  89. 89.

    Saigai taisaku kihon-; see Inaba (2011, pp. 22–23), Umeda (2013, pp. 4–6).

  90. 90.

    These are usually schools or community centres. For captivating accounts, see e.g. Gill et al. (2013a); on the distinction between emergency and temporary shelters, temporary housing, and permanent housing, see e.g. Johnson (2007, pp. 436–437).

  91. 91.

    On the selection of victims and the process of relocation, see Kitamura (2011, p. 55).

  92. 92.

    See Kitamura (2011, pp. 46–51) for legal details and eligibility requirements.

  93. 93.

    Hisai-sha seikatsu saiken shi'en-; on the enactment and subsequent amendments, see Yagi (2007), Deguchi (2014), and Part 2.9.

  94. 94.

    For critical remarks, see Part 3.1.

  95. 95.

    Koyô hoken-; for details, see Umeda (2013, p. 21).

  96. 96.

    Seikatsu hogo-; for a critical overview of the laws and social policies for homeless people, see Iwata (2007, pp. 152–162).

  97. 97.

    For statutory details, see Umeda (2013, p. 20).

  98. 98.

    See Brasor and Tsubuku (2011); on some legal solutions, see Umeda (2013, pp. 16–17).

  99. 99.

    JPY 640.7 billion was allocated for this in the first supplementary budget alone. see also Japan Press Weekly (2011a), Umeda (2013, p. 19).

  100. 100.

    See also Mainichi Daily News (2011).

  101. 101.

    The average price of a Japanese condominium (manshon) was JPY 51 million in 2014, and although property in the rural Tôhoku region is much cheaper, typical two-bedroom apartments with a kitchen, living and dining room (2LDK) are only available for around JPY 700,000 in coastal Ishinomaki City, for example.

  102. 102.

    See Kabashima (2012, p. 14).

  103. 103.

    See generally Wakabayashi et al. (2011).

  104. 104.

    See again Kitamura (2011, pp. 53–57). Due to vague national criteria, eligibility for temporary housing significantly differed among the municipalities, whereas after the Kobe earthquake, priority for placement was explicitly given to the elderly, the disabled, single parents, and low-income households, Johnson (2007, p. 445).

  105. 105.

    Higashi-nihon dai-shinsai fukkô kihon-; English transl. available online:

  106. 106.

    See Cho (2014, p. 173), Kennedy et al. (2008) on how to “build back better” after a tsunami.

  107. 107.

    Nevertheless, partial use of the grants for clearance and disposal of debris, reallocation of land to relocate housing and so forth might have at least helped the victims indirectly.

  108. 108.

    The multi-faceted crisis has also been dealt with by different ministries, which took different stances on the way to respond: For example, the Ministries responsible for government-affiliated financial institutions, such as the Ministry of Economy, Trade and Industry, the Ministry of Land, Infrastructure, Transport and Tourism, and the Ministry of Agriculture, Forestry and Fisheries, unlike the Ministry of Finance, which does not have authority over policy-based finance, could arrange for public zero-interest loan schemes, see Financial Services Agency (2011c).

  109. 109.

    See e.g. Yamasaki (2003, p. 91).

  110. 110.

    Transl. by Umeda (2013, p. 19).

  111. 111.

    This legal line of argument invokes that a “haircut” to the creditor’s claims would constitute an outright expropriation of their property rights, see Financial Services Agency (2011b).

  112. 112.

    See Financial Services Agency (2011b).

  113. 113.

    See Anand Kumar and Newport (2005, p. 178).

  114. 114.

    Japan’s previous financial crises demonstrate a long history of bank bailouts for bad-loan problems, from the rescues by the Ministry of Finance after the steep drop in real estate prices of 1991 and 1993, followed by the 1995 total collapse of jûsen companies—mortgage lending institutions created by banks in the 1970s.

  115. 115.

    Kin'yû kinô no kyôka no tame no tokubetsu sochi ni kan suru hôritsu; the amendment partially revising this act was by Law No. 80/2011.

  116. 116.

    For details, see Torihata (2012, pp. 204–206).

  117. 117.

    See Japan Press Weekly (2011a).

  118. 118.

    In “The Shock Doctrine: The Rise of Disaster Capitalism,” Klein critically observes that disasters are regularly followed by imposing deregulation, privatisation, and cuts to social spending so swiftly that victims and other stakeholders have no chance to oppose. In this way, crises are seen to be exploited to push through controversial, exploitative policies while citizens are too emotionally and physically distracted, see Klein (2008).

  119. 119.

    Here, “compensation” does not refer to tort law.

  120. 120.

    This three-fold division represents three general categories of social justice and reflects other, similar divisions within the domain of justice, for instance, the distinction between the purposes of tort law, or between the moral duties of fidelity, beneficence and care.

  121. 121.

    See e.g. Feldman (2013, p. 339).

  122. 122.

    See e.g. Cho (2014, p. 174).

  123. 123.

    See Financial Services Agency (2011b), Shûkan Kin'yû Zaisei Jijô (2011).

  124. 124.

    See the distinction between the groups of higai-sha, hisai-sha, and hinan-sha in Sect. 1.

  125. 125.

    See Cho (2014, pp. 169–171, p. 173, p. 174), Claremont (2014, p. 96).

  126. 126.

    See generally Kabashima (2012).

  127. 127.

    See fundamentally Deutsch (1985, pp. 2–3, pp. 38–45) and the contributions in Fourie et al. (2015).

  128. 128.

    For an authoritative overview, see Verchick (2012).

  129. 129.

    The following is based on Hörhager and Weitzdörfer (forthcoming), where further references can be found.

  130. 130.

    Again, see Cho (2014).

  131. 131.

    For suggestions to improve resilience, see Shimizu (2012, p. 40), Ranghieri and Ishiwatari (2014).

  132. 132.

    On these principles and the challenges of nuclear liability, see e.g. Weitzdörfer (2014).

  133. 133.

    In English, this term was also coined by Clancey (2006, p. 6, 226 et seq.).

  134. 134.

    Tsunami taisaku no suishin ni kansuru hôritsu.

  135. 135.

    Aldrich (2012) argues that social capital is key to building resilience.

  136. 136.

    The Imperial Earthquake Investigation Committee (Shinsai yobô chôsa-kai), see Clancey (2006, p. 151).

  137. 137.

    The Sendai Framework for Disaster Risk Reduction (2015–2030), adopted by 187 UN member states in 2015, constitutes the most comprehensive risk management framework.

  138. 138.

    See e.g. Yamamoto (2011, p. 74).

  139. 139.

    On the resilience of Japanese insurance companies to earthquakes, see Soichiro Moridaira, Chap. 5 of this volume.

  140. 140.

    Jishin hôken ni kan suru hôritsu.

  141. 141.

    For critical remarks, see Parts 3.6(b) and (c).

  142. 142.

    For details, see Waldenberger (2013), Kozuka (2012, p. 7), Feldman (2013, p. 339).

  143. 143.

    For an overview, see Waldenberger (2013).

  144. 144.

    See e.g. Dôjima hôritsu jimu-sho [Dôjima Law Office] (2011, pp. 218–220).

  145. 145.

    For more data, see Takahiro Tsuda, Chap. 2 of this volume.

  146. 146.

    See JFBA (2011a, p. 60).

  147. 147.

    See e.g. Dôjima hôritsu jimu-sho [Dôjima Law Office] (2011, pp. 218–220), Williams and Jacobs (2011, p. 191), Katô (2012), Ôgaki (2013), Waldenberger (2013). Japan’s insurance penetration rate is increasing, particularly since 2011, yet still under 30% as of 2016, see also Takahiro Tsuda, Chap. 2 of this volume.

  148. 148.

    See e.g. Bin et al. (2008). Endeavouring to consider behavioural or cultural factors leading to ignorance of well-documented tsunami risks would go beyond the scope of this chapter; for a theoretical explanation, see e.g. Kunreuther and Pauly (2004).


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This project at the Centre for the Study of Existential Risk, University of Cambridge, was made possible through the support of a grant from Templeton World Charity Foundation, Inc. The opinions expressed in this publication are those of the author(s) and do not necessarily reflect the views of Templeton World Charity Foundation, Inc. Previous work on this topic was funded by the Volkswagen Foundation, within its “Key Issues for Research and Society” initiative, through the research project “Protecting the Weak: Entangled Processes of Framing, Mobilization and Institutionalization in East Asia” (AZ 87382) at the Interdisciplinary Centre for East-Asian Studies, Goethe University Frankfurt/Main, and by the DIJ Tokyo through a visiting scholarship awarded to Julius Weitzdörfer.

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Weitzdörfer, J., Beard, S. (2019). Law and Policy Responses to Disaster-Induced Financial Distress. In: Kamesaka, A., Waldenberger, F. (eds) Governance, Risk and Financial Impact of Mega Disasters. Economics, Law, and Institutions in Asia Pacific. Springer, Singapore.

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