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Home > Research and Studies > BOJ Reports & Research Papers > Research Papers 2011 > (Research Paper) Responses to the Great East Japan Earthquake by Payment and Settlement Systems and Financial Institutions in Japan
October 27, 2011
Payment and Settlement Systems Department
Bank of Japan
On Friday, March 11, 2011, a massive earthquake occurred in Japan, with the seismic center off the Sanriku coast in the northeast of the main island of Honshu, about 400 kilometers (250 miles) from Tokyo. With a magnitude of 9.0, the Great East Japan Earthquake was the largest ever recorded in the nation's history. The earthquake and the resulting tsunamis (tidal waves) devastated a vast area and caused a great number of casualties. Large numbers of buildings and facilities were damaged or washed away. Constraints on electric power supply intensified over a wide area, mainly due to the accident at a nuclear power station.
The financial sector in Japan was seriously impacted by the disaster, in terms of both physical damage and indirect effects. Nevertheless, even in the aftermath of the earthquake, the nation's payment and settlement systems and financial institutions,2 as well as the Bank of Japan, continued to operate in a stable manner, and managed to maintain their normal functioning as financial infrastructure on the whole. This was largely due to the dedicated efforts of financial institutions in disaster areas to restore their business offices and resume operations to meet the needs of depositors and firms. It also reflected the constant efforts made by payment and settlement systems and financial institutions to put in place robust business continuity arrangements prior to the disaster.
Like electricity, water, gas, telecommunications, railways, and roads, financial services are a key component of the basic lifelines of a society, serving as critical infrastructure that supports people's lives and economic activity. A failure of payment and settlement systems or financial institutions to function effectively could preclude customers from making deposits, cash withdrawals, or payments, thereby intensifying public anxiety in times of disaster. In order to ensure that payment and settlement systems, financial institutions, and financial markets can operate as normally as possible in emergency situations as financial infrastructure supporting economic activity, continuous efforts to enhance business continuity arrangements are essential.
This paper describes the initial responses taken by payment and settlement systems and financial institutions in Japan in the wake of the disaster and how they succeeded in maintaining the functioning of financial infrastructure, focusing primarily on the maintenance of payment and settlement functions. The paper also discusses issues to be addressed in the future to enhance business continuity arrangements.
In response to the disaster, the Bank has taken all possible measures to maintain its functioning as the central bank on numerous fronts, ranging from the smooth provision of cash services to stable operation of its payment and settlement system, the Bank of Japan Financial Network System (BOJ-NET). The Bank will continue to further strengthen its business continuity arrangements. In addition, through its day-to-day monitoring and oversight activities, as well as on-site examinations, the Bank will encourage private-sector payment and settlement systems and financial institutions to strengthen their arrangements and actively support their initiatives to this end.
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