March 28, 2024

Tax Increase Proposal Raises Fear of a Slowdown in Japan

TOKYO — Japan is on a roll. Its economy is growing at a robust 3.8 percent, the stock market is up by 40 percent this year, and the country is on the cusp of overcoming 15 years of deflation. Adding to the positive trend, Tokyo just won its bid to host the 2020 Summer Olympics, raising hopes of an investment and construction boom.

What could possibly go wrong?

A plan to raise taxes at the worst conceivable moment, economists warned.

“It’s nonsense. Japan is only midway to recovery, and hasn’t fully escaped deflation,” said Goushi Kataoka, chief economist at Mitsubishi UFJ Research and Consulting, which is affiliated with Japan’s largest bank, the Mitsubishi UFJ Financial Group.

“Just as we are beginning to see the light, we’re threatening to snuff it out,” Mr. Kataoka said. “We’re trying to roast the pig before it’s fat enough to eat.”

After weeks of debate, Prime Minister Shinzo Abe appears ready to go ahead with a plan to raise Japan’s national sales tax rate in April, to 8 percent from 5 percent — part of his bid to rein in the country’s public debt, which has surged to more than twice the size of its economy.

But opponents say that raising taxes on spending is premature, especially because it could damp consumer spending, considered the weakest link in Japan’s nascent recovery. If spending slumps, Japan could slide back into the deflationary morass that has dogged it for 15 years.

Such a misstep threatens to bring down the curtain prematurely on Japan’s economic revival this year, led by Mr. Abe’s bold set of monetary and economic policies, called “Abenomics,” which has brought about one of the most unexpected turnarounds in recent years. Japan is now one of the most promising engines of growth this year among the world’s developed economies

Still, proponents of raising the tax are pushing for action now because they fear a return to the dysfunction that has marred Japanese politics for several years through a succession of prime ministers, said Noah Smith, an assistant professor of finance at Stony Brook University.

Mr. Abe, with solid support, could be the last prime minister in a while to be able to push through unpopular changes, he said. “The optimal policy is to wait to raise the consumption tax, maybe a year. But given Japan’s political dysfunction, many people are afraid that if you wait too long, that will never get done,” Mr. Smith said. “The idea is that if we see a chance to make unpopular structural reforms, we need to take it now, even though it’s not the optimal time.”

To soften the blow, the Japanese government is considering putting together a stimulus package of as much as 5 trillion yen, a sum that would return the equivalent of 2 percentage points of the tax rate increase to consumers and companies, local news reports have said. Mr. Abe has said he will not a make an official decision until early October. Japan’s business lobby has also called on the government to slash the country’s relatively high corporate tax rates to make up for an anticipated drop in consumption.

Speaking at a government panel on economic and fiscal policy on Friday, Mr. Abe suggested that Japan’s recovery was robust and its economy was already escaping deflation. He also said that both government and private sector spending before the 2020 Tokyo Games would further bolster economic recovery.

The Games “will be a catalyst that will clear away 15 years of deflation and shrinking,” he told the panel.

Supporters of a higher sales tax, including Japan’s powerful Finance Ministry, say the move is necessary to rein in the country’s public debt. By all measures it is gargantuan, in large part because of the costs of caring for Japan’s increasing elderly population. Earlier this year, national debt topped 1 quadrillion yen, or $10 trillion, for the first time — more than twice the size of Japan’s economy, and larger than the economies of Germany, France and Britain combined.

Article source: http://www.nytimes.com/2013/09/16/business/global/as-japan-recovers-fears-that-tax-increase-could-halt-progress.html?partner=rss&emc=rss

Economic Expansion Slows Down in Japan

TOKYO — Japan’s economic growth slowed in the second quarter to an annualized rate of 2.6 percent, government data showed on Monday, clouding the outlook for the economic policies of Prime Minister Shinzo Abe and raising concerns that he may put off moves to tackle the country’s enormous public debt.

This was the third consecutive quarter of growth for Japan’s roughly $5 trillion gross domestic product, the third-largest in the world after the United States and China. Still, the expansion fell short of analysts’ expectations for Japan, whose economy grew at a robust pace of 3.8 percent in the previous quarter, helped by the Abe government’s bold monetary and fiscal stimulus drive.

Economists polled by Reuters had expected Japan’s economy to grow at a similarly healthy clip in the April-June quarter. But weak capital expenditure, reflecting continued caution among Japanese corporations over the country’s long-term prospects, slowed growth, according to figures released by the Cabinet Office.

Compared with the previous quarter, the Japanese economy grew 0.6 percent in the latest quarter. Private consumption rose a better-than-expected 0.8 percent over the previous quarter, as a brightening mood in Japan pushed up spending on food, travel and luxury products. But capital expenditure fell by 0.1 percent, below a market forecast for a 0.7 percent increase.

Signs of slowing growth could strengthen the hand of critics of Mr. Abe’s economic drive, which has relied heavily on monetary stimulus and government spending to revive growth in Japan’s long-deflationary economy. Mr. Abe has promised to follow up with market deregulation and easing trade barriers to raise Japan’s long-term growth potential.

Weaker growth could also derail Japan’s plans to raise taxes and pare back its soaring debt, which reached 1 quadrillion yen ($10 trillion) in the second quarter, more than twice the size of its economy. To start easing that debt burden, the government plans to raise a flat consumption tax rate to 8 percent in April 2014 from the current level of 5 percent, and to 10 percent in October 2015.

According to government calculations, raising the consumption tax rate could double tax receipts to more than 5 percent of Japan’s gross domestic product, compared with the current 2 to 3 percent, helping Japan better balance its finances.

Whether Japan goes ahead with raising taxes will depend on how sustainable the government deems current economic growth to be. Under the current plan, the consumption tax will proceed if it is likely that the Japanese economy can sustain at least 2 percent real G.D.P. growth for the next decade.

Some economists warn that raising taxes too soon could derail Japan’s nascent recovery.

“A tightening in fiscal policy would almost certainly snuff out the current cyclical rebound,” Duncan Wooldridge and Silvia Liu, economists at UBS, said in a note to clients ahead of the G.D.P. numbers.

“The desire for fiscal consolidation in the long run must not sacrifice the war on deflation in the short run,” they said. “To hike or not to hike the consumption tax is the only policy which matters over the next four quarters.”

Article source: http://www.nytimes.com/2013/08/12/business/global/economic-expansion-slows-down-in-japan.html?partner=rss&emc=rss

I.M.F. Calls for Japan Reforms and Plan to Clear Debt

TOKYO — The International Monetary Fund said Japan’s economy is recovering from years of stagnation, but that far-reaching reforms and a “credible plan” are needed to reduce its debt mountain and sustain growth in the long run.

The assessment, in a report released Monday, said the near-term outlook of the world’s third-largest economy “has improved considerably” thanks to monetary easing and increased government spending under Prime Minister Shinzo Abe’s administration.

It forecasts that Japan’s economy will grow 2 percent in 2013, helped by stronger demand at home and overseas, but will expand only 1.2 percent in 2014 as consumers tighten their belts following an expected increase in sales tax.

The IMF’s report, based on a consultation with the Abe government last month, echoes earlier comments by the World Bank’s lending arm on the “Abenomics” strategy of breaking out of a long spell of debilitating deflation by flooding the economy with money. At Abe’s behest, Japan’s central bank is striving to generate 2 percent inflation within the next two years.

But the report emphasized the need for “significant adjustments” to help reduce Japan’s public debt, which will amount to nearly 250 percent of gross domestic product this year.

A central concern is a potential loss of confidence in Japan’s ability to service its debt, given that repaying just the interest on government bonds is consuming a growing share of limited tax revenues. Japan’s parlous fiscal situation is compounded by surging health and welfare costs from the fast-expanding share of elderly in the population. Rising inflation would inevitably push interest rates on government bonds higher, adding to the burden.

Uncertainty over the resilience of the recovery has prompted debate in Tokyo over whether the government should follow through on its pledge to raise the sales tax from 5 percent to 8 percent by next April, and eventually doubling it to 10 percent by 2015.

IMF Mission Chief for Japan Jerry Schiff said it would be a mistake to change course on that plan now.

“We think that the plan needs to go ahead as conceived, in other words to move from 5 to 10 percent in two parts,” he said on a conference call. The tax hike surely will affect the economic rebound “but we don’t think it will knock the recovery off of its rails,” Schiff said.

Unlike some other countries facing crushing levels of public debt, such as Greece and Cyprus, Japan’s financial system remains generally sound, the report said.

Most public debt is held by Japanese investors and financial institutions, helping to reduce the threat of a rapid and destabilizing exodus of cash. Japan’s banks have relatively low levels of debt, while a rally in share prices since late last year has burnished their financial performances.

Over the long run, Japan’s economic growth will likely settle near about 1 percent, as government spending on reconstruction from the March 2011 tsunami disaster is wound down, taxes increase and the pool of employable workers ages and shrinks, it said.

Japan needs wide-ranging structural reforms to support growth, encourage investment and improve competitiveness, it said. The report mentioned such priorities as bringing more women into the workforce, relaxing immigration restrictions and opening markets to more trade through participation in the U.S.-led talks on the Trans-Pacific Partnership regional trading bloc.

“Incomplete progress on fiscal and structural reforms could weigh on confidence and undermine the success of the new policy framework,” it said.

Inflation, the factor Abe says will underpin growth, should increase from about 0 percent to 0.7 percent by the end of this year, the report said. Much of that will stem from rising costs associated with a weakening in the Japanese yen, which increases costs for imported food, fuel and other commodities. Sales tax hikes will further support inflation.

Schiff said Abe’s recovery plan, if properly implemented, should lead to a faster growing and more dynamic economy that will bring the yen back to “equilibrium from its moderately undervalued position.”

The IMF expects long term inflation to average 2 percent. The report only indirectly referred to the issue of whether wages will increase enough to ensure Japanese consumers will spend more and not just tighten their belts to cope with rising prices and higher taxes. Consumer spending makes up about three quarters of Japan’s economy.

It urged reforms to reduce the growing number of workers, about 70 percent of them women, hired as non-permanent staff, who are paid significantly lower wages than “regular workers” and face limited job security and inferior access to social insurance.

The report said the costs of such a labor market setup were “substantial” and recommended steps to encourage stricter legal standards but more flexibility for employment in general.

Article source: http://www.nytimes.com/aponline/2013/08/05/business/ap-as-japan-imf-economy.html?partner=rss&emc=rss

Wall Street Closes Lower

Stocks slipped lower on Tuesday as market participants awaited clues on when the Federal Reserve may reduce its stimulus efforts.

The Standard Poor’s 500-stock index, the Dow Jones industrial average and the Nasdaq composite were all about 0.8 percent lower in afternoon trading.

If the Dow ends the session higher, it would be the 21st Tuesday for the Dow to gain, the longest winning streak for any day of the week since 1900. But that streak appeared in jeopardy.

Intraday swings have increased in the last week as concerns have risen that the Fed may reduce its bond-buying program sooner than expected.

Many investors are also likely to hold off big bets until the nonfarm payrolls report, to be released on Friday, provides an update on the employment situation. The market will also focus on the Fed’s Beige Book of economic conditions in the United States, to be released on Wednesday.

Three Fed officials — Sarah Bloom Raskin, a Federal Reserve governor; Esther L. George, president of the Federal Reserve Bank of Kansas City; and Richard W. Fisher, president of the Federal Reserve Bank of Dallas — are scheduled to deliver speeches Tuesday.

European stocks ended the session slightly higher in thin trading, with the FTSE Eurofirst 300 index gaining 0.3 percent.

Overnight, Japan’s Nikkei climbed more than 2 percent, its biggest one-day rise in three weeks, as currency swings amplified moves ahead of Wednesday’s announcement from Prime Minister Shinzo Abe on the third leg of his $1.4 trillion “Abenomics” stimulus strategy.

The latest changes are likely to center on economic reforms but sources told Reuters the government could also include steps urging Japan’s public pension funds to increase their investment in equities and overseas.

Wall Street stocks rallied late on Monday, after disappointing factory data and comments from the president of the Federal Reserve Bank of Atlanta, Dennis Lockhart, who told Bloomberg Television that the central bank is committed to its record stimulus program.

In corporate news, Zynga, the online game company, announced its biggest round of layoffs and warned of weak bookings for the current quarter. Its shares rose 0.6 percent.

United States regulators proposed designating American International Group, Prudential Financial and GE Capital for heightened oversight in a long-anticipated move aimed at cracking down on risks to markets.

FedEx said on Monday it would permanently retire or will hasten the retirement of 86 aircraft and more than 300 engines as the package delivery company modernizes its fleet. Its shares were 0.3 percent higher.

Article source: http://www.nytimes.com/2013/06/05/business/daily-stock-market-activity.html?partner=rss&emc=rss

In Wake of Japanese Market Dip, Investors Find Comfort in Higher Factory Output

Industrial production rose by a better-than-expected 1.7 percent in April from a month earlier, as exports started to recover on the back of a yen that has weakened by almost 20 percent in the last six months. But exports were still down 2.3 percent from the same month a year earlier.

Core consumer prices, which exclude fresh food, fell 0.4 percent in April from a year earlier, for the sixth straight month of declines, though the clip was slower than the 0.5 percent decline in the year to March.

Prices were supported partly by rising energy costs, as the weak yen added to Japan’s fuel import bills.

Consumer prices in Tokyo for the month of May rose 0.1 percent from a year earlier, the first increase in more than four years, a sign that nationwide prices could soon follow suit, ending the deflation that has long weighed on Japan’s economy.

Household spending cooled slightly after a strong showing in the first quarter, rising 1.5 percent in April from a year earlier in price-adjusted real terms. That uptick fell short of a median market forecast of 3.1 percent, though economists still expect spending to gain traction as consumer sentiment continues to improve.

The data offered a reprieve to recent market anxiety. A rally in the Japanese stock market, propelled by optimism over Prime Minister Shinzo Abe’s efforts to overhaul the long-suffering economy, has faltered in the last week as investors became nervous over the effectiveness of those efforts, as well as their potential side effects.

A 5.2 percent slide in Tokyo shares on Thursday took the Nikkei 225-share index to more than 13 percent below its peak last week. The sharp market correction followed a surge of more than 80 percent in the index from mid-November to mid-May, when trading suddenly turned volatile as investors took stock of the challenges that face Mr. Abe’s economic turnaround program.

Tokyo shares rebounded on Friday morning, with the Nikkei index jumping over 200 points, or 1.59 percent, in the opening minutes of trade.

Still, it remains unclear whether Mr. Abe’s agenda, nicknamed Abenomics, can bring about a goal, set by the Bank of Japan, to achieve 2 percent inflation over the next two years in a country where prices have fallen for over a decade.

To jolt Japan out of its deflationary slump, the central bank unleashed an audacious stimulus program last month, promising to inject $1.4 trillion into the economy to kick-start growth. In addition, the government bolstered spending on public works projects. The stimulus has also driven the yen to a 4 1/2-year low against the dollar, a boon to Japan’s exporters.

But many economists have called the two-year time frame ambitious. A recent Reuters poll of analysts suggested that the Bank of Japan might have to pursue its program for up to five years before it stokes enough inflation.

Some members of the Bank of Japan’s policy board are also skeptical of the two-year time frame, according to minutes released this week.

A spike in long-term interest rates, which poses high risks for Japan’s highly indebted government, has added to the worries.

Analysts and investors are also eager for progress on promised structural overhauls, which many see as crucial to the overall economy-lifting efforts of Mr. Abe’s government.

“The falling share prices point to the dangers that are inherent in Abenomics,” Ryutaro Kono, chief economist for Japan at BNP Paribas, said in a research note.

The program “at first triggered an asset bubble and brought about an economic euphoria,” Mr. Kono said. “But the endgame is a higher risk of financial ruin.”

Other analysts took a brighter view. “A lot of investors were sitting on the sidelines as the market soared, hoping for a pullback,” Nicholas Smith, Japan strategist at CLSA Asia-Pacific Markets, said in a note to clients Friday. “They now have that opportunity.”

Bettina Wassener contributed reporting from Hong Kong.

Article source: http://www.nytimes.com/2013/05/31/business/global/in-wake-of-market-dip-japanese-investors-find-comfort-in-higher-factory-output.html?partner=rss&emc=rss

Strategies: Japan Starts to Recharge After Two Lost Economic Decades

Envious foreigners called its export-driven economy a “miracle.” Its real estate and stock markets seemed to defy gravity, and its financiers were so flush with cash that they bought skyscrapers, golf courses and corporate empires far from Japan’s shores.

Then the bubble burst. In 1990, Japan began more than 20 years of stagnation and deflation. Invest in Japan? For most foreigners, it was wiser to avoid it. At the end of 1989, the Topix, a k a the Tokyo Stock Price index, reached 2,881. Now it’s less than half that.

It’s possible, at least, that those lost decades are finally over. Japanese markets have become turbocharged again, and are beginning to move markets worldwide. This year alone, the Topix has risen more than 22 percent in dollar terms, far exceeding the gain of the Dow Jones industrial average and nearly every other major stock market. The yen has weakened sharply, trading at more than 100 to the dollar for the first time in four years. That exchange rate should make many Japanese companies more profitable and more competitive. It may also inject inflation into the Japanese economy, encouraging consumers to spend and companies to invest.

“What is happening in Japan is revolutionary,” said Mohamed El-Erian, the chief executive of Pimco, one of the world’s largest bond managers. “Nothing they’ve done since the Second World War comes close in terms of economic experimentation,” he said.

It’s far too soon to judge whether “Abenomics” — the new policies of Prime Minister Shinzo Abe and Haruhiko Kuroda, the Bank of Japan governor — will be successful. But they have already begun to change expectations within Japan and around the world.

Most crucially, there are signs that the policies may be breaking Japan’s debilitating spiral of deflation. In April, Mr. Kuroda declared that Japan would achieve an inflation target of 2 percent within two years — an ambitious goal that he said he would achieve by doubling the country’s monetary base.

The central bank, which has already been holding short-term interest rates near zero, is making direct purchases of long-term bonds and other securities. That program of quantitative easing is enormous, Mr. El-Erian said: “It is much bigger than the Federal Reserve’s in the United States, when you consider the size of the two economies.”

Is the new monetary policy working? It hasn’t been in place long, and no up-to-date inflation data is yet in hand. The latest government figures show that in March, Japan’s consumer price index fell 0.5 percent, annualized, a deflationary reading. But Japan’s bond prices imply that expectations for inflation two years from now have already jumped to well above 1.6 percent.

“It’s not quantifiable yet, but the psyche of the Japanese consumer may actually be changing,” said Taizo Ishida, lead manager of the Matthews Japan fund, a stock mutual fund for American investors. “Anecdotally, you can feel it,” he said. “People are beginning to put money into equity mutual funds in Japan, and consumers are buying luxury goods. But we’ll have to see where this ends up.”

MR. ABE, who faces elections in July in the upper house of the Diet, Japan’s parliament, has not unveiled all the details of his policy, which comprises “three arrows”: monetary easing, fiscal policy and structural reform. Monetary easing is the only one of the three that is substantially under way. It appears to be largely responsible for the yen’s weakening and could have a sharp impact.

Forced for many years to adjust to competitive pressures from overseas, Japanese companies said in a government survey last year that they were profitable at an exchange rate of 84 yen to the dollar, a big change from 1986, when they said they needed a rate of 175 yen to the dollar.

The current rate of more than 100 yen to the dollar will make many export-oriented companies much more profitable, said Eileen Dibb, a portfolio manager and Japan specialist at Pyramis Global Advisors, the institutional arm of Fidelity Investments. Her portfolios include Toyota and Fuji Heavy Industries, and both should benefit from the yen depreciation, she said. While the cheaper yen could heighten trade frictions, Mr. Abe says he would like Japan to join the negotiations for the Trans-Pacific Partnership, an Asia-Pacific free trade pact supported by the Obama administration.

Ms. Dibb is bullish on the Japanese stock market, saying it is still quite reasonably priced even after its recent run. In 1988, for example, the Topix traded at a price-to-book ratio of 6.5, compared with only 1.4 today, yet current earnings are attractive and strengthening. For the first time in years, she says, the outlook is extremely positive. “It’s as though Japan has turned the lights back on,” she said.

Mr. Abe has adopted a stimulative fiscal policy. It may give the economy a short-term boost, but in a speech in April, Christine Lagarde, managing director of the International Monetary Fund, warned that Japan’s fiscal policy “looks increasingly unsustainable,” saying its debt-to-G.D.P. ratio is now nearing an extraordinarily high 245 percent.

Japan has some factors in its favor, however, making it quite different from debt-burdened countries like Greece, said M. Campbell Gunn, portfolio manager of the T. Rowe Price Japan fund. Japan’s debt is overwhelmingly financed by its own citizens, he noted; it is denominated in its own currency, and Japan runs a steady current-account surplus, all of which insulate it from bond market pressure.

Furthermore, he said, Japan can reduce debt by privatizing or more efficiently operating billions of dollars worth of state-owned assets, like the nation’s ports and its postal system, which doubles as a gigantic savings bank. “Japan now is in some ways like the U.K. before Margaret Thatcher,” he said. “There is much that could be done if the government wanted to do it.”

Structural problems, however, are major impediments to economic growth. Japan’s population has been aging and declining in size, said Roger Aliaga-Díaz, a senior economist at Vanguard. Unless Japan permits enough immigration to offset this, he said, demographic constraints are likely to trim gross domestic product by 1.3 percentage points a year. “That’s a big hurdle for Japan,” he said.

Shifts like raising the retirement age and removing impediments to work force participation by women could improve matters, but improvements are likely to be slow in coming, he said.

Still, Japan’s markets have awakened, its economy may be reviving, and the flood of yen is certainly flowing into other markets around the world, Mr. El-Erian said. “This is an ambitious effort,” he said. But, he added, “Japan’s mounting debt load and difficult structural problems make this program a very high-risk and high-reward one.”

Article source: http://www.nytimes.com/2013/05/19/your-money/japan-starts-to-recharge-after-two-lost-economic-decades.html?partner=rss&emc=rss

Sony Doubles Annual Profit Estimate

Sony said it expected to book a net profit of ¥40 billion, or $404 million, for the financial year that ended March 31, compared with an estimate it made in February of ¥20 billion. The Tokyo-based company also raised its sales estimate to ¥6.8 trillion from an earlier forecast of ¥6.6 trillion. The previous year, the company reported a ¥260 billion net loss on ¥7.2 trillion in sales.

Sony’s brightening fortunes underscore how the aggressive monetary easing pursued by the government of Prime Minister Shinzo Abe and the Japanese central bank are galvanizing exporters in the world’s third-largest economy, after those of the United States and China. Analysts predict larger profits this earnings season as the country’s top exporters bask in the effects of a yen that has weakened by almost 20 percent since Mr. Abe took office in late December, thanks to a huge injection of money into the Japanese markets.

A weak yen can bolster Japanese exporters by making their products more price-competitive overseas, or inflating the value of their overseas earnings. The reverse had been true for the country’s exporters since 2008, as the yen — considered an investing haven during times of turmoil — strengthened considerably.

Now the yen is unwinding, and more quickly than most experts or companies expected. Sony said it had assumed foreign exchange rates for the fourth quarter of ¥88 to the dollar and ¥115 to the euro. Instead, those rates were ¥92 to the dollar and ¥122 to the euro.

Sony’s asset sales — including office buildings in Tokyo and New York, and a health care data provider — also helped lift Sony’s bottom line. Sony’s life insurance unit benefited from a stock market rally that improved investment performance.

Sony reports official results for the just-ended fiscal year on May 9. Its shares have risen almost 70 percent during the past six months, beating a 54 percent rise in the Nikkei 225-share index.

With its robust profit forecast, Sony is set to join a flurry of exporters reporting stellar earnings. Also Thursday, the industrial giant Mitsubishi Heavy Industries said its annual net profit was likely to total ¥97.3 billion, far higher than a previous forecast of ¥70 billion and a fourfold increase from a year earlier. On Wednesday, Canon raised its net income projection for the past fiscal year, despite slashing its sales target 15 percent because of sluggish sales of its digital cameras.

Economists at UBS said in a recent report that they expected the weakening yen to remain “a critical driver” of increased profits for Japanese companies in the current fiscal year. The economists estimate nearly 50 percent earnings growth in Japan for the financial year ending March 2014.

Still, for some struggling exporters, the effects of the weak yen have not been enough to start a recovery. Nintendo, the video game company, posted a smaller-than-expected annual profit of ¥7.1 billion Wednesday, thanks to disappointing sales of its Wii U home consoles and 3DS portable machines.

At Sony, it remains unclear how much the company can leverage its improved finances to revive its consumer electronics business, which has lost ground to rivals like Apple and Samsung. Sony is pushing to make bigger inroads in the smartphone market with sleek models like the Xperia. It is also set to release the PlayStation 4, its next-generation home game console, this holiday season.

Article source: http://www.nytimes.com/2013/04/26/business/global/26iht-sony26.html?partner=rss&emc=rss

Proposed Rules for Japan’s Nuclear Industry Called Too Strict

The relatively stiff requirements by a panel that included nuclear power supporters appeared to take Japan’s nuclear industry and its backers in government by surprise, and pose a challenge to Prime Minister Shinzo Abe just weeks into his term.

Mr. Abe has made it clear that he wanted to restart Japan’s scores of idled reactors — all but two of which remain offline in the wake of the 2011 Fukushima plant disaster — and has even said that he wanted to build new ones. But he and his Liberal Democratic Party, the architect of Japan’s nuclear industry, already faced significant opposition from a population that was traumatized by the nuclear crisis that spread radioactive materials over a wide swath of the country’s northeast.

The crisis at the Fukushima plant, which led to meltdowns in three reactors, started after a 9.0 magnitude earthquake caused a tsunami that swept through the plant, knocking out the electrical power needed to run crucial cooling systems.

The guidelines require a secondary command center away from the reactor buildings so that workers can control emergency cooling systems and vents even if they are forced to pull back from the heart of the plant during an emergency. They also call for power companies to prepare for worse tsunamis than they had previously planned for, forcing at least some oceanside plants to raise sea walls, a costly endeavor.

The rules also ban power companies from building or operating reactors on top of active faults, but continuing contentious discussions over what an “active” fault consists of might allow the government to avoid closing such plants for good.

Many of the proposed regulations bring Japan in line with standards in the United States.

The new guidelines are the latest step in Japan’s struggle to chart its energy future after the disaster. Previous governments led by the Democratic Party had given vague promises to phase out nuclear power as polls indicated that many people feared nuclear power and remained worried that the collusive ties between government and the industry that left the country vulnerable to disaster were ones that could not be broken.

But Mr. Abe has argued that keeping the reactors idle would hinder a recovery he is trying to jump-start with promises to tackle deflation that have already led to a weakening in the yen welcomed by struggling exporters. Nuclear energy had provided 30 percent of the nation’s electricity needs before the disaster.

With virtually all of its reactors offline, Japan has been forced to import more fossil fuels, driving resource-poor Japan to a record annual trade deficit last year. Before the accident, the country consistently posted large trade surpluses.

Still, Mr. Abe’s ability to sway the panel — or try to overrule it — might be limited. The regulatory body has been given significant autonomy, and is able to take a wide range of actions without government approval, partly as a result of maneuvering by Mr. Abe’s own party when it was out of power. Fearing the anti-nuclear agenda of some in the then-ruling Democratic Party, the Liberal Democrats had demanded that the body be insulated from political pressure.

But supporters of Japan’s powerful nuclear industry appeared to be starting a campaign Friday to ensure that the rules did not go into effect as they were.

“If we don’t have a stable energy supply, how are businesses supposed to invest and help Japan grow?” Hiromasa Yonekura, chairman of the Japan Business Federation, told reporters Friday.

Japan’s ten nuclear operators, including Tokyo Electric Power, the operator of the ravaged Fukushima Daiichi Nuclear Power Plant, could pay a total of 1 trillion yen to make the required reinforcements, the Nikkei business daily reported Friday, quoting estimates from the power companies.

The panel is expected to finalize the rules in July after a public hearing process, and there are lingering suspicions among anti-nuclear activists that the new panel will ultimately go easy on the country’s nuclear operators. Though nuclear power plants must meet the new guidelines before reactor restarts are cleared, the panel has left open the possibility that some standards could be suspended to allow limited reactor restarts.

The five-member nuclear authority was put in place after complaints that previous regulators were too close to industry.

Article source: http://www.nytimes.com/2013/02/02/world/asia/proposed-rules-for-japans-nuclear-industry-called-too-strict.html?partner=rss&emc=rss