Foreign Policy Blogs

THE LAND OF THE RISING “NUCLEAR” SUN – AGAIN!

 

Japan – Land of the Rising Sun ; Source: http://www.fitsnews.com

The experiment is over. Japanese voters went to the polls just yesterday on December 16 to elect a new parliament and overwhelmingly voted incumbent Japanese Prime Minister Noda from the ruling Democratic Party of Japan (DPJ) out of office. Yoshihiko Noda, a former finance minister who wanted to curb Japan’s immense public debt, had only become Japan’s sixth prime minister in five years in August 2011. Focusing on the huge public debt has definitely been a more than worthy goal given the size of the Japanese problem which pales in comparison to European statistics if you only compare the sheer numbers and do not dive into a broad assessment of which country could get out of this mess “easier,” why and how. Anthony Fensom gives us in his article in The Diplomat the numbers: “In 2011, general government gross debt totaled nearly 230 percent of GDP and is projected to reach 245 percent in 2013, with the government’s fiscal deficit currently around 10 percent of GDP. Net public debt, which subtracts from gross debt government assets such as public pension funds, has also increased tenfold over the past two decades to reach more than 125 percent of GDP. In comparison with Europe’s indebted economies, Greece reached crisis point with its debt to GDP ratio of just 150 percent, while the Spanish government has faced a storm with a debt ratio below 100 percent.”

Growing public dissatisfaction with the ruling DPJ over how PM Noda tackled a myriad of ills such as stagnant economic growth, a continuous deflationary downturn, rising welfare costs given the demographics, dwindling tax revenues and – as far as foreign policy goes – rising tensions between China and Japan examplified in the spat over contested islands in the East China Sea with a nationalistic undertone, eventually led to his democratic ouster. PM Noda will be succeeded by the party chief of the Liberal Democratic Party (LDP), a party long dominating Japanese politics – almost continuously since 1955 – before having been defeated by the DPJ back in 2009. The designated PM Shinzo Abe held the post of prime minister for a year back in 2006-2007. What’s more, the LDP-New Komeito alliance won 325 seats in the Lower House, which would allow it to override Upper House vetoes (“supermajority”). Jiji Kyodo, writing for the Japan Times, makes clear how crushing the defeat for the DPJ has been: “The DPJ had 233 seats and the LDP 118 when Noda dissolved the chamber on Nov. 16.”

Now, what do these election results have to do with energy policy? Actually a lot because the designated PM Shinzo Abe held the post of prime minister for a year back in 2006-2007 and it is not too far-fetched to expect him to pick up where he left off when he resigned five years ago as far as nuclear policy goes in a now post-Fukushima Japan. We can expect the LDP government with its supermajority in the Lower House to revert to the guiding principles of an energy policy plan proposed in August 2006 with the following features: “Japan’s energy policy is based on market principles, but at the same time it seeks to ensure a stable supply and environmentally friendly production and consumption of energy.  In order to achieve the goals, there are some important practical actions: Promoting energy conservation and efficiency measures, ensuring a stable supply of oil; (in particular, with a focus on) efforts to ensure domestic reserves of oil and to independently develop oil fields; development and introduction of diverse sources of energy (meaning that) diverse forms of energy reduces the risk of being negatively affected by disruptions in energy supply or soaring energy costs, and therefore contributes to the stability of the supply, and basing the energy market on market principles (meaning that) Japan is moving ahead with the liberalization and deregulation of its energy markets.” At least pertaining to the last point, we can expect at a minimum a cessation of further deregulation efforts and more likely a tightening of the regulatory nuclear environment along with government oversight and review. In this respect, the dreadful Fukushima experience and the lessons learned there (the need of an independent regulator with the ability and willingness to enforce) as well as a still very anxious public will help to calibrate the implemented measures in order to arrive at appropriate nuclear energy policy measures to keep the Japanese public safe.

In respect to a specific “Nuclear Energy National Plan” as part of the energy plan proposed in August 2006 , the following objectives were established: “Continuing to meet at least 30 to 40% of electricity supply even after 2030 by nuclear power generation, further promoting the nuclear fuel cycle, aiming at commercializing practical Fast Burner Reactor (FBR) cycle.”

In sum, all this could mean that nuclear power in Japan will be back from the dead and it would actually be a smart as well as rational move as I have pointed out in my article “Thoughts on Japan’s First Post-Fukushima Energy Policy” on September 18: “A resource-poor country should not create more self-inflicted resource dependencies. Japan should also not follow Germany’s example which is embedded in a totally different security environment. (…) The result will be increased electricity costs (and remember), higher energy costs can lead to a loss of global competitiveness of Japan’s dominant industrial sectors.” In addition, the revert to the above mentioned principles could address environmental issues because no carbon dioxide emissions are generated.

Lastly, a Bloomberg article recently talked about how power costs are rising in the wake of last year’s nuclear disaster at the Fukushima nuclear power plant. The Bloomberg authors quote Tokyo Steel’s president, Toshikazu Nishimoto, from an interview on December 12 in Tokyo: “Higher electricity tariffs will push up costs for an industry already burdened by weak domestic demand, overcapacity and a strong yen.” No surprise there – check out what I have written in this respect on September 18. Bloomberg’s Masumi Suga and Yasumasa Song also quantify Japan’s self-inflicted “energy cost burden” as for this one company. They write: “The shuttering of most of Japan’s nuclear reactors after last year’s Fukushima disaster has forced utilities to turn to alternative energy sources and pay a higher price for fuel. Kyushu Electric Power, which supplies Japan’s southern island, plans to increase electricity prices by 14 percent for corporate customers from April 2013. The proposed increase will raise power costs by as much as 800 million yen ($9.6 million) a year (…). The company’s electricity bill accounts for as much as 30 percent of its production costs.” There evaporates your international competitiveness… Thus, welcome back PM Abe and say hello to the Japanese nuclear energy industry! Who will have to fight harder again for worldwide market share from this rising “nuclear” sun you ask? France’s Areva and nuclear companies in South Korea – those will not be too pleased. Any winners? How about uranium mining countries like Canada or Australia.

 

Author

Roman Kilisek
Roman Kilisek

Roman Kilisek is a Global Energy & Natural Resources Analyst.
His research focuses on global energy politics, mining, infrastructure and trade, global political risk and macroeconomics. He is fond of using scenario development and analysis.

He has lived on three continents and traveled to over 40 countries around the world. He now lives and works in New York City.

GreadDecisions in foreign policy discussion group ad v2