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Global Category Intelligence

Q2 2025

ALERT: Earthquakes in Japan: Supply Chains Shaken, Not Stirred

A strong earthquake, registering a magnitude of 7.1, rattled Japan last Thursday, 8 August 2024. The epicenter was about 12 miles southeast of the city of Miyazaki, on the island of Kyushu, in Japan.

Impact of the Miyazaki Earthquake on Indirect Commodities

The earthquake caused disruptions in various indirect commodities, particularly energy, MRO, and logistics. Although major facilities like the Kumamoto plant of Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest foundry, reported no significant damage and are expected to maintain their production schedules, the earthquake did disrupt key transportation infrastructure. This includes damage to highways, railroads, and ferry terminals, particularly in areas like Sendai, which could affect logistics and the movement of goods. Production facilities, such as Kyocera's plants in Kagoshima Prefecture, suffered damage, leading to the suspension of some production lines to assess and repair the equipment. However, there were no severe impacts on nuclear plants, a critical part of Japan's energy supply.

Japan Issues “Megaquake” Warning

The Japan Meteorological Agency issued its first-ever advisory about a potential “megaquake” along the Nankai Trough following the earthquake. Earthquakes with a magnitude larger than 8.0 are considered megaquakes. Japan estimates the next Nankai Trough megaquake could be as powerful as magnitude 9.1.

There have been an estimated six megaquakes throughout history, including the 9.5-magnitude earthquake in Chile in 1960, the Indian Ocean earthquake in 2004, which registered 9.1 and triggered a massive tsunami that affected 14 countries, and the Tokoku earthquake off the coast of northeastern Japan, which registered 9.1 and caused a nuclear meltdown at the Fukushima Daiichi Power Plant in 2011.

What Impact Would a Megaquake Near Japan Have on Indirect Commodities

Japan is no stranger to severe earthquakes. It lies on the Ring of Fire, an area of intense seismic and volcanic activity on both sides of the Pacific Ocean, which makes it “one of the most earthquake-prone areas in the world,” said Shoichi Yoshioka, a professor at Japan’s Kobe University. “About 10% of the world’s earthquakes of magnitude 6 or higher occur in or around Japan, so the risk is much higher than in places like Europe or the eastern United States, where earthquakes are rare,” Yoshioka said.

Japan is a critical player in the global electronics, automotive, and machinery supply chain. A megaquake could cause widespread delays and shortages of key components and materials, which would ripple across the globe. The disruption of manufacturing and logistics in Japan would directly affect the availability of essential goods, leading to significant challenges for procurement and supply chain management in various sectors and ultimately driving up costs and causing delays worldwide. This impact could lead to long-term shifts in global trade patterns and force companies to reevaluate their supply chain strategies.

Reducing the Risk of Severe Impacts from Earthquakes

To reduce the risk of impacts from severe earthquakes in procurement and supply chain management, organizations can implement several strategies:

Diversification of Suppliers: By sourcing from multiple suppliers across different geographic locations, companies can mitigate the risk of supply chain disruptions if an earthquake impacts one region.
Supplier Risk Assessment: Regularly assess the risk profiles of suppliers, particularly those in earthquake-prone areas, and develop contingency plans for alternative sourcing.
Inventory Buffering: Maintain higher inventory levels or strategic stockpiles of critical materials and components to buffer against potential supply chain interruptions.
Strengthening Infrastructure: Invest in robust infrastructure, including warehouses and transportation networks, designed to withstand earthquakes, particularly in regions with high seismic activity.
Technology and Data Analytics: Use technology and data analytics to monitor supply chains in real time, allowing quick adjustments and responses during a natural disaster.
Business Continuity Planning: Develop comprehensive business continuity plans that include specific scenarios for earthquake disruptions and detailed procedures for maintaining operations, communication, and recovery efforts.
Collaboration with Governments and Industry Groups: Engage with government bodies and industry groups to enhance preparedness and response strategies, including participating in early warning systems and disaster response initiatives.