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Disaster Strikes Japan
The recent earthquake followed by the tsunami that struck Japan and the nuclear catastrophe have taken a huge toll of that country, lets take a look at the broader picture briefly asseses the likely impact on the gems and jewellery industry.
By: Diamond World News Service
May 2 2011 2:53PM
Reference: 5955  

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The recent earthquake followed by the tsunami that struck Japan and the nuclear catastrophe that followed have taken a huge toll of that country. In terms of people dead, missing or wounded; in terms of property destroyed and the setback it has meant to businesses and the economy as a whole. Nilan Singh while taking a look at the broader picture briefly asseses the likely impact on the gems and jewellery industry.

The disaster that struck Japan was beyond a nightmare, beyond anything that could be imagined. Images of the aftermath of the 8.9 magnitude earthquake and the subsequent tsunami that invaded North East Japan, are still rife in out minds. By mid April, the Japanese authorities had officially declared that 13,456 persons were dead; 15,150 missing and about 4,902 people injured; and that more that 139,020 have been displaced by the disaster.

The nuclear crisis triggered at the Fukushima plant by the twin natural calamities still haunts Japan. After weeks of battling it out, Japanese authorities raised the severity of the nuclear crisis from 5 to 7 – the maximum level. This put it on par with the world's worst nuclear disaster, which hit the Chernobyl plant in Ukraine in 1986. Analysts feel that the world is not yet apprised of the actual scale of the nuclear problem or its likely fallout.

By about mid-April, the Japanese government lowered its assessment of the country's economy for the first time in six months on the back of the serious impact of the earthquake/tsunami on exports, production and consumption. "Although the Japanese economy was picking up, it shows weakness recently, due to the influence of the Great East Japan Earthquake," the cabinet office said in its monthly report. This came a few days after the IMF cut its growth forecast for Japan.

Japan is the second largest consumer market for jewellery, with China and India fast catching up and almost on par, in terms of world share. The global gems and jewellery industry yet to recover fully from the shock of the financial crisis of 2008, was not only perturbed by the enormity of the calamity which hit the Japanese people, but also wondered what this would mean to the industry specifically.

In a special intervention at the recently concluded Presidents Meet of the WFDB, Michio Iwasaki, President, Tokyo Diamond Exchange described the loss and hardship that the Japanese people were undergoing. Putting the extent of the impact in perspective he said, “The area destroyed covers 443 square kilometers, which is 2.7 times of the area covered by Tel Aviv and 2.2 times of that of Antwerp. Please try and imagine a similar situation, i.e. a tsunami wiping out the whole of your hometowns.” He said that even “people in Tokyo began to hunt for their daily necessities although there was no direct damage in Tokyo itself”. Iwasaki added, “Consequences of the disasters also have a big influence on the diamond and jewellery industry of Japan. Therefore department stores and retail stores began to shorten their business hours and all the jewellery exhibitions in Tokyo were canceled.” He said that most Indian diamond dealers in Tokyo had shut shop and returned home. “The diamond market in Japan has dropped to about 30% of what it was before the earthquake.” However, he was optimistic that in time the situation would be normalised, saying, “We Japanese are patient and generous in facing such hardships.”

Indian gems and jewellery businesses trading with Japan were also confident that any ripples caused by the immediate situation in Japan would soon settle down. Analysts feel that as Japan currently accounts for roughly 5-7% of the global diamond market, even a fall of 20%-30% would not have a major impact on overall offtake. Even this would only be for the short term and be a limited setback, they say. “The impact is more at a sentimental level”, said one diamantaire. Some also opined that there had been no immediate impact felt on trading volumes which would be experienced in the coming months.

Japan-based Nitin Khinduka of V.N. Trading echoed a similar view. “Sentiments are down”, he said. “It will take about six months to a year for the situation to stabilise.” Khinduka was of the opinion that the tsumani did not affect consumer confidence as much as the nuclear crisis did, impacting as it did Tokyo which is the heart of the jewellery consumer market. The government was pumping in money and making a big effort to normalise the situation, he said, expressing confidence that this would soon be done.

Nirmal Kumar Bardiya of RMC Gems India Ltd, which also has an extensive business with Japan said, “There are some reduced sales and we will continue to see some impact through the summer, but we expect things to recover August onwards.” He felt that there had been no extensive loss suffered by those in the jewellery trade as a result of the disasters. Bardiya added “The confidence level is already improving since the water problem in Tokyo has been solved.”

While the global gems and jewellery industry can take heart in the fact that the Japanese disasters have not made a major dent in its business, the people of Japan and its economy which has been struggling for years will definitely take time to recover from this traumatic experiences. Towards this they have both the sympathy and support of the entire world. And even as various governments have come forward to help Japan’s rebuilding efforts, the gems and jewellery industry is also contributing its mite for the people of Japan, at various levels.

U.S. Jewellers Do Their Bit

Jewellers in the United States have quickly organised themselves to contribute towards relief measures in crisis ridden Japan.

“Jewelers For Japan”, has been set up as a fundraising organisation to provide help to the victims of Japan’s twin natural calamities. The effort has been launched by a group of individuals and organisations in the jewellery industry. The Jewelers for Japan is co-chaired by Julianne Paulsen CEO of Viaggio Bracelet and retail store "Rocks the Jewelers," and online jewellery industry pioneer Jacques Voorhees, of VeriChannel, LLC.

In a departure from most other such efforts, the group has appealed to jewellers and consumers around the country to donate scrap gold and silver jewellery, in lieu of cash. The organization has made an arrangement with refiner Rio Grande, for scrap gold and silver collected from such donations to be refined and converted to cash without a refining fee. Under the agreement, Rio Grande will send the money directly to the American Red Cross, to help in its Japan relief effort.

The organization has also planned an outreach programme and its website provides advice on how jewellers can arrange donations from their local community, taking in donations through local stores.

"It's heartbreaking for all of us to watch those images of people suffering, coming across the TV every night," said Paulsen. "This is something our industry can do that will make a difference.”

"We're hoping the campaign goes viral," said Voorhees. "To make it happen, we'll be harnessing online social media with Facebook, Twitter, and Linked-In campaigns to spread the word. We hope to reach 80% of retail jewelry stores in the U.S. within two weeks."

Interestingly, the group's tagline reads: "Mother nature is powerful. But so are we."

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