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CH103 | GSI
🕑 Added 2025-02-05 03:30:04 +0000 UTCJanuary 17, 1995
Tokyo Stock Exchange, Chuo Ward, Tokyo, Japan
The vast trading floor, filled with traders waiting for the market to open, was suffocating with tension.
More than a hundred traders huddled in front of their booths, their faces grim as they monitored breaking news on the earthquake through TV broadcasts and Bloomberg terminals.
With aftershocks still rumbling and the full extent of the damage gradually coming to light at daybreak, the devastation was beyond words.
"The Hanshin Expressway overpass collapsed? How is that even possible…?"
"Over 3,000 dead or missing already, and Kobe Port is so severely damaged that it’ll be out of operation for a long time."
"This is truly horrific."
It was nothing short of a cataclysm.
Even as they watched the ruined streets of Kobe on the news with a sense of sorrow, the traders were mentally crunching numbers, calculating just how massive an impact this earthquake would have on the market.
"This is going to be disastrous for the market."
"The damage alone will run into the trillions of yen—there’s no way this can be anything but bad news."
"With Kobe Port crippled, exports will take a massive hit."
"Considering the sheer scale of casualties and property damage, insurance companies are going to be obliterated."
The entire city of Kobe looked as if it had been bombed, and it was obvious that insurance companies would be forced to pay out astronomical sums in claims.
Just like the foreign exchange market, which had already taken a beating, the stock market was certain to be hit by a wave of panic selling and a brutal nosedive.
As they imagined the impending market collapse, many swallowed hard, their throats dry with anxiety.
Amid this palpable tension, the opening bell finally rang.
The moment the bell sounded, the entire trading floor erupted into chaos, as if a violent storm had swept through.
"Sell 5,000 shares of Mitsui Sumitomo at market price!"
"10,000 shares of Taisho Life! 1,590 yen—no, 1,400 yen! Just sell it!"
"25,000 shares of Tokyo Life, dump them all!"
Traders threw their arms in the air, shouting at the top of their lungs.
Some screamed into their phones, while others, looking as if their feet were on fire, frantically yelled out sell orders. The trading floor had descended into complete pandemonium.
The panic started with insurance companies, expected to face enormous payouts, but soon, the sell-off spread indiscriminately across all sectors.
The massive stock ticker on the wall turned entirely green, indicating a sea of declining prices.
"Damn it! How far is this going to drop?"
"We’re already down 5%!"
"Sell everything at the lower limit!"
Everyone was desperate to unload their holdings, but with no buyers in sight, only sell orders flooded in from all directions.
As a result, the Nikkei index, which had already plummeted over 300 points at the opening, continued its freefall, sending shockwaves of fear through the market.
Watching the index spiral downward with no end in sight, traders clutched their heads in despair, while others simply stared at the ticker in numb disbelief, completely drained.
***
Daehung Securities Headquarters, Seoul
In a private office designed in a modern style, reflecting its owner’s personality, Seok-won, stood in front of his desk with his arms crossed. He wore a luxurious purple tie, his expression calm and composed.
On the Bloomberg terminal installed on his desk, he closely monitored the real-time status of the Japanese stock market while speaking via speakerphone with Andrew in New York.
[The Nikkei just broke below 18,700.]
"I see it too," Seok-won replied, his gaze fixed on the screen.
"We shorted at 21,870, so that’s over a 14% profit."
[That’s right,] Andrew responded, his voice brimming with excitement.
[The damage from the earthquake is worsening by the hour. The decline is expected to deepen.]
Despite hitting another massive jackpot, Seok-won remained unfazed, his face calm as he watched the Nikkei plunge sharply, forming a long bearish candlestick.
The market was in freefall, selling pressure overwhelming any support levels, collapsing without resistance—it was a terrifying sight.
While most expected the Japanese stock market to crash even further under such catastrophic circumstances, Seok-won thought differently.
'When everyone is looking in the same direction, that’s exactly when an unforeseen variable appears.'
~
His mind drifted back to a conversation with Manager Oh, before his return.
"It’s done."
As always, Manager Oh sat comfortably in a plastic bathhouse chair, his feet slipped into well-worn three-stripe slippers.
Lowering the newspaper he had been holding, he glanced at Seok-won’s impeccably polished shoes before grinning mischievously.
"Damn, kid. Your skills are getting sharper by the day. At this rate, you’ll take over the entire financial district and build your skyscraper!"
"Forget skyscrapers. I’d be happy just renovating that rundown shop of yours."
Seok-won scoffed, unimpressed by the playful praise about his supposed future as a real estate mogul.
"And for the record, I’m married with a kid. Stop calling me ‘kid.’ Do I still look like a child to you?"
"Listen here, punk. Even when you hit sixty, you’ll still be a kid to me."
Manager Oh smirked, habitually pulling out a cigarette and gesturing with it as he spoke.
Seok-won considered arguing back but remembered he had never won a single verbal match against Manager Oh. Shaking his head in resignation, he muttered:
"Fine. Call me whatever you want."
As he closed the lid of his shoe polish tin and put it aside, something suddenly came to mind. He looked up.
"By the way, sir. Can I ask you something?"
"What’s on your mind?"
Manager Oh exhaled a cloud of smoke before answering.
“You're talking about the Japanese stock market? Normally, after a major earthquake, prices should drop, right?”
“That’s what I thought.”
“Then why was it rising even higher than before the earthquake?”
To Seok-won, it made no sense.
“That’s because of the learning effect.”
“The learning effect?”
Holding his cigarette between his fingers, Manager Oh paused for a moment, lost in thought.
“Come to think of it, it’s already been sixteen years. You remember the big earthquake in Kobe, right?”
“Yes.”
“The epicentre was near Kobe, so the damage was devastating. If I remember correctly, over 6,000 people died.”
“That many?”
“Yeah, it was a massive 7.3-magnitude quake.”
A shiver ran down Seok-won’s spine.
“Wow... I can’t even imagine how terrifying that must have been.”
“Exactly. That’s why you should be grateful South Korea barely experiences earthquakes.”
As if it were second nature, Manager Oh slipped into his usual nagging tone. He tapped the ashes from his cigarette into an empty paper cup, stained with old coffee marks, before continuing.
“The loss of life was tragic, but the economic impact was even worse.”
Seok-won remained silent, sensing where the conversation was going.
“The entire city was practically reduced to rubble, and the total financial damage exceeded 10 trillion yen.”
“10 trillion yen?!”
Seok-won’s eyes widened in shock at the staggering figure.
“Yep. Kobe was one of the two key shipping hubs in East Asia, along with Hong Kong. When it was crippled, the consequences were even more severe.”
Seeing how focused Seok-won was, Manager Oh suddenly smirked and threw out a question in a teasing tone.
“So, in that situation, what do you think happened to the Japanese yen and stock market?”
“With such massive losses, investors must have dumped Japanese assets, causing a huge crash.”
“At first, that’s exactly what happened.”
“...?”
"The yen, which had surged below 95 per dollar, suddenly shot up past 103. At the same time, the Nikkei index plummeted more than 4%."
It was only natural for financial markets to spiral into panic in the wake of such a massive disaster.
"But from the way you're explaining it, something unexpected must have happened."
Manager Oh smirked.
"You're getting sharp."
"Well, I've known you for years now. I can read between the lines."
"Hahaha!"
Manager Oh burst into laughter.
When he first met Seok-won, the young man had drive and determination but still showed signs of inexperience.
Yet now, he had grown enough to banter back with ease, even exuding confidence. Manager Oh couldn’t help but feel proud.
"Exactly. Just like you, everyone thought the same way and dumped the yen and Japanese stocks. At first, the market really did lean heavily toward a crash."
"I would have done the same."
"Some even went further, betting big on the decline to make a fortune. As I said earlier, at that moment, everyone believed the yen and Japanese stock market would collapse. It was a bold move, but not entirely reckless."
Seok-won nodded. He had thought the same way.
Manager Oh took a long drag from his cigarette, exhaling slowly before continuing.
"But then, something completely unexpected happened."
Seok-won leaned forward, his curiosity piqued.
He was so engrossed in Manager Oh’s story that it felt like watching a thrilling movie.
"The Nikkei, which had plunged, completely reversed—rising within just one day."
"Not only did the drop stop, but in just two days, the market completely recovered all its losses."
Seok-won's expression twisted in disbelief. "How is that even possible?"
"Crazy, right? But in hindsight, it was actually the most logical outcome."
Seok-won looked at Manager Oh with an even more puzzled expression.
"Right now, Japan is stuck in what they call the ‘Lost Decade,’ struggling through a prolonged economic slump. But back then, it was still the world's second-largest economy, standing shoulder to shoulder with the U.S. The bubble had burst, sure, but that didn’t change the fundamental reality."
Manager Oh tapped the ash off his cigarette into the empty paper cup.
"Ever heard the saying, ‘Even a rich man takes three years to go broke’?"
"Yes."
"As soon as the market started collapsing, the Japanese government stepped in immediately. They announced an emergency relief fund of over three trillion yen, which was the turning point."
"Three trillion yen? That's massive."
"In simple terms, the government started throwing cash everywhere—more than 30 trillion won—to fund a massive reconstruction project. Now, what do you think happened next?"
"Ah!"
Seok-won gasped as he finally grasped the meaning.
"Construction companies and every business involved in the rebuilding effort must have hit the jackpot."
"Exactly. With that kind of windfall, it would have been stranger if the market didn’t rally."
Seok-won nodded, fully convinced.
"On top of that, insurance payouts meant that Japanese investors had to pull their money back from overseas investments, driving the yen right back up."
"Wow... That was a completely unexpected twist."
Even hearing about it now, it was shocking.
For traders who had actually been in the market at the time, it must have felt like getting blindsided by a hammer to the head.
Then, a sudden thought flashed through Seok-won’s mind, making his eyes widen.
"Then... those who shorted the yen and Japanese stocks must have lost a fortune?"
"Don’t even get me started."
Manager Oh let out a bitter smile, taking another drag of his cigarette.
"More than a few people went completely broke and had to pack up and leave Yeouido for good."
Seok-won hesitated, then carefully asked, "So, Manager Oh… were you on that side?"
"What?!"
"Did you, uh… take a hit?"
"You little punk. What are you implying?"
Seeing Manager Oh’s childish sulking, Seok-won silently concluded.
'Yeah… He lost a lot of money.'
~
Seokwon, having smoothly snapped out of his reverie, asked calmly,
"How far has the yen fallen?"
[It's just barely crossed 104.6 yen.]
Considering the yen had been under 95 yen just the day before, this was a massive drop.
Anticipating that the yen would fall even further, traders were still selling off in panic.
Seok-won stared at the plummeting yen exchange rate graph on the Bloomberg terminal in front of him and immediately gave instructions.
"Close all positions right now and start buying yen!"
"What?!?"
TL/n -
Insurance companies and the Japanese government played a crucial role in stabilizing and boosting the Nikkei 225 index after the Great Hanshin Earthquake (1995) by injecting liquidity, funding reconstruction, and restoring investor confidence.
Here’s how:
Insurance Payouts & Market Liquidity =>
Massive Payouts: Insurance companies had to pay out large sums for earthquake damages, injecting billions of yen into the economy.
Reinvestment of Reserves: Insurers often sell foreign assets and buy domestic stocks to cover claims, increasing demand for Japanese equities.
Government Intervention & Stimulus =>
Bank of Japan (BOJ) Liquidity Injection: The BOJ immediately pumped liquidity into the financial system to prevent a market panic.
Interest Rate Policies: The BOJ kept monetary policy loose, making borrowing cheaper and encouraging investment.
Government Reconstruction Spending: The government allocated over ¥10 trillion for rebuilding, boosting industries like construction, steel, and real estate—sectors that influenced the Nikkei 225.
Market Confidence & Speculation =>
Investors Expected Economic Stimulus: Traders anticipated government intervention and increased spending, leading to stock purchases.
Construction & Infrastructure Stocks Surged: Stocks of companies involved in rebuilding (like Sumitomo Construction and Kajima Corporation) rose, lifting the broader index.
Insurance Companies Buying Back Stocks =>
Large insurers, such as Nippon Life, had significant holdings in Japanese stocks. To maintain financial stability and hedge against losses, they increased equity investments, supporting the market.
Overall Impact on the Nikkei 225 =>
Short-term decline: The index initially dropped about 5% right after the earthquake.
Rebound in weeks/months: Due to insurance payouts, reconstruction, and government support, the Nikkei recovered and gained stability.
Long-term stagnation: Despite the short-term boost, Japan’s economy faced ongoing deflation and banking crises, keeping the market in a long-term downtrend through the late 1990s.
So, while the insurance sector and government stimulus helped lift the index, it was more of a temporary rebound rather than a sustained bull run.
