Price shocks in disaster: the Great Kantō Earthquake in Japan,1923

This paper tests the operation of markets in the wake of a sudden exogenous shock in prewar Japan, the Great Kantō Earthquake of 1923. Using a unique monthly wholesale price dataset of provincial cities, we found that the earthquake had a positive impact on the price of rice and timber in the sample cities. Our results also indicate that the wholesale price of rice in cities in the northeast of Japan, which were more closely integrated with the affected region, experienced more significant price rises than those in western Japan. Nevertheless, although further research using retail as opposed to wholesale prices of goods is needed, these preliminary findings suggest that the diffusion of price instability outwards from the affected region was on a lesser scale than might have been expected.