Impact of the Fukushima Nuclear Disaster: Analysis on Japan’s Oil Consuming Sectors

Abstract

Since the oil price shocks of the 1970s, several studies have found significant impacts of oil prices on macro variables. However, it is particularly crucial to know how each micro sector in an economy, such as the residential, transport, industrial, and nonenergy sectors, respond to oil price impulses. In this research, we try to shed light on the impact of crude oil price volatility on each sector in Japan, the world’s third-largest crude oil consumer. To do so, we apply a vector auto regression model and perform impulse response analysis by using quarterly data from 1990Q1 to 2014Q1. The findings indicate that some economic sectors, such as the residential sector, did not have significant sensitivity to the sharp oil price fluctuations. In contrast, some other sectors, like the commercial, industrial, and transport sectors, were strongly sensitive to the drastic oil price fluctuations. Moreover, our findings show that after the Fukushima disaster in 2011, which led to the shutdown of nuclear power plants in Japan and increased the country’s reliance on oil imports, the sensitivity of most sectors to oil price volatility declined.