Episode 4: Major Crisis! No Oil?! The Oil Shock and the Nikkei Average ⛽💸 (1970s)
Last time, we talked about the sparkling era of "High Economic Growth." Color TVs, air conditioners, and cars filled the cities, the Osaka Expo was a huge success, and the Nikkei Stock Average was on an upward trajectory.
But just as Japan was riding high, a tremendous crisis suddenly struck. That was the "Oil Shock"! Like a rollercoaster plummeting, all of Japan was thrown into chaos.
What was the "Oil Shock"? Why did it happen? (1973)
Do you know how much "oil" (petroleum) is used in our daily lives? For generating electricity, powering cars and airplanes, making plastic products... in fact, an incredible number of things around us are made from oil. At that time, Japan relied almost entirely on imported oil from foreign countries for its energy.
However! In October 1973, the Fourth Middle East War broke out. Triggered by this war, Arab oil-producing countries adopted a strategy of using oil as a weapon (called the "oil strategy"), declaring, "We won't sell much oil to countries supporting Israel! And we're raising prices drastically!"
As a result, the price of oil skyrocketed by about four times in just a few months, throwing countries around the world into a panic! This was the "First Oil Shock (Oil Crisis)."
Japan in Panic! 😱 "Frenzied Prices" and the Toilet Paper騒動
The Japanese economy, heavily reliant on oil, suffered a massive blow from this oil shock.
- Things disappearing?! Prices skyrocketing!: Fear spread that "If there's no oil, we might not be able to make or transport goods!" and the prices of various items shot up. This was called "Frenzied Prices" (kyouran bukka). In 1974, consumer prices rose by over 20% compared to the previous year!
- No toilet paper?!: Rumors spread that paper would run out (which was actually false), and items like toilet paper, tissues, and detergents disappeared from store shelves. There were even scenes of people rushing to stores and scrambling for products (this is called the "Toilet Paper騒動" or "hoarding騒動").
This chaos brought Japan's economic growth to a halt. In 1974, the economy recorded its first negative growth (meaning the economy shrank compared to the previous year) since World War II. The dazzling era of high economic growth came to an end here.
Nikkei Average also Shaken! 📉 The Party's Over...
When the economy is in such turmoil, stock prices can't remain unscathed. Uncertainty about companies' futures led to an increase in people selling stocks.
Just before the oil shock in January 1973, the Nikkei Stock Average had reached a high of over 5,300 yen. However, it began to decline from there, and the oil shock delivered another blow. By the autumn of 1974, it had fallen to the 3,300 yen level.
How Did Japan Overcome It? Japan's Resilience! 💪
Although Japan faced a major crisis, what happened next was remarkable. Everyone started to think, "If we don't have oil, let's try to use as little as possible!"
- Nationwide "Energy Saving"!: TV broadcasts ended at 11 PM, gas stations closed on Sundays, and neon signs were dimmed. Households also cooperated by lowering heating temperatures and conserving electricity.
- Companies' "Energy-Saving Technology" Development!: Companies put tremendous effort into developing machines that run on less energy, fuel-efficient cars, and homes with better insulation. This contributed to Japan's later strength as a "technological powerhouse."
- Search for New Energy!: Realizing the danger of relying solely on oil, research into alternative energy sources like solar power and nuclear energy began in earnest.
In 1979, the "Act on the Rational Use of Energy" (Energy Saving Act) was enacted, promoting a nationwide system for efficient energy use.
A Second Crisis! The Second Oil Shock (1979)
Just when things seemed to settle down, it wasn't that simple. In 1979, the Iranian Revolution triggered another surge in oil prices. This was the "Second Oil Shock."
However, having experienced the first oil shock, Japan was able to respond relatively calmly. Energy conservation efforts were underway, and both companies and the public were better prepared, so it didn't cause as much panic as the first time.
The oil shock was a truly difficult event for Japan, but by overcoming it, it could be said that the Japanese economy became stronger and wiser.
Now, what kind of era will Japan and the Nikkei Stock Average face after weathering this major storm? Next time, we'll look at the period from stable growth to that era of frenzied excitement, the "Bubble Economy"!