Helsinki Times

New year brings economic aftershocks

Japan, the world’s third-largest economy after the United States and China, is now facing difficult economic decisions as the country searches for its way to recovery.

HIDEO SATO, and his family escaped to the city of Aizuwakamastu, 200 km from the radiation emitting Fukushima power plant that was struck by a massive tsunami on 11 March 2011.

“We were forced to move from our house in Okuma-machi barely eight kilometres from the damaged nuclear plant. We wanted to protect our children from radiation, but now we are at the mercy of the government,” says 47-year-old Sato.

Nine months after the disaster, Sato, a former employee at a car sales company, lives on a 1,500-dollar monthly unemployment dole.

Sato’s plight is shared by tens of thousands of people from the tsunami-battered coastline of Tohoku that was home to factories producing automobile components and semiconductors for export.

The World Bank estimated the economic cost of Tohoku to be 235 billion dollars, making it the most expensive natural disaster in history.

“The nuclear disaster has added to Japan’s financial woes. The Tohoku disaster, the high Yen, and the global economic crisis spell a bleak forecast for the New Year,” Kenji Obayashi, an economist at Waseda University, explains.

Apart from the crippling natural and nuclear disasters, the Japanese economy is reeling from a Yen that has strengthened almost 30 per cent against the dollar, hurting export competitiveness. In turn, this has increased unemployment.

To top it all is the scare of a loss of energy supplies for the resource poor country.

National energy demands

Prof. Tsutomu Toichi, advisor to the Institute of Energy Economics, warns in Nippon, a leading news magazine, that the non-operation of nuclear power reactors, that previously met 30 per cent of national energy demands, has created a bleak picture.

“Local governments are refusing to allow operations (of nuclear plants) to resume because of public wariness towards nuclear power. To make up for the shortfall in electricity supply the government will step up generation from existing thermal plants. In such a scenario fuel costs would soar, costing the manufacturing industry 38 per cent higher in electricity fees” said Toichi.

Against this depressing backdrop, the Japanese government approved a 1.16 trillion-dollar draft budget last week for the fiscal year. Allocation for disaster reconstruction was set at 150 billion dollars.

Tokyo Electric Power Co. (TEPCO), the operator of the Fukushima plant, has asked for 8.8 billion dollars in aid for compensation payments to those who had voluntarily evacuated. This is additional to the 11.5 billion dollars already granted to TEPCO.

Obayashi explained that the latest budget will not herald a miraculous transformation, but serve as a stopgap measure to deal with the grim reality of an aging population that is increasing social security spending - already at a record high of 270 billion dollars or one-third of the national budget.

National unemployment rate stands at 4.7 per cent, with disaster affected prefectures now reporting close to seven percent.

Developments in Aizuwakamastu, now home to 6,000 nuclear evacuees from Fukushima vicinities, have become a focal point for ongoing discussions on post-disaster recovery.

Domestic economic recovery

This city of 150,000 people known for its pristine mountain landscape and hot springs was already struggling with domestic economic recovery when the Tohoku disaster struck, badly affecting tourism and agriculture.

Kumi Inamura, a member of the Aizuwakamastu town management organisation, explains that the city is taking tentative steps to boost the local economy through local solutions.

“Aizuwakamastu can no longer depend on injections of public funds from the central government because Tokyo cannot afford to do this,” she explained. Her organisation is now helping local business projects by supporting people who can start new ventures and boost jobs.

Ideas being floated include turning Aizu University, the lone higher education institution in the city into a venture business centre and giving students venture capital.

Smaller incubating projects that receive support are businesses owned by women or those that promote local brands.

Obayashi said such developments are modest, but represent a crucial transformation to Japanese society and economy. “The stirrings in Aizuwakamatsu indicate a growing desire in localities to do things their own way,” said Obayashi.

Such moves, he said, challenge the post-war economic miracle in Japan when links between the bureaucracy and industry created the invincible Japan Inc. “That is crumbling now. We are moving to more diversity and change,” he said.

SUVENDRINI KAKUCHI
IPS
LEHTIKUVA - AFP PHOTO - YOSHIKAZU TSUNO