Japan 'on the verge of a financial meltdown'

Fukushima's financial fallout

As reports surrounding Japan's nuclear disaster get steadily worse, the country is on the verge of a financial meltdown

al-Jazeera,

9 September, 2013

In March 2011, a tsunami hit Japan, killing almost 19,000 people and crippling the Fukushima Daiichi nuclear plant.

The shutting down of the plant removed thousands of megawatts from the country's power grid - but that was just the beginning of the problems caused by Fukushima's meltdown.

Continuing fears about food safety are destroying the livelihoods of farmers and fishermen who have worked the Fukushima lands and coastline for generations, while concerns over nuclear power in general is creating a financial black hole for Japan's government.

Before the disaster, which led to the country bringing 50 of its nuclear reactors offline due to safety concerns and mounting public pressure, the nuclear industry was providing 30 percent of Japan's electricity.

It was expected that this level would increase to at least 40 percent by 2017, reducing import costs and decreasing the reliance of Japan's power grid on traditional fossil fuels.

According to Paul Scalise, a research fellow at the University of Tokyo, it was the good will of the Japanese people and its industries that prevented rolling blackouts hitting the country in the summer months of both 2011 and 2012.

"The word that was used here at the time was 'Setsuden' - essentially it means 'saving electricity'," he said.

"The message that went out was that it was people's patriotic duty to conserve electricity, and it worked - there is evidence that people responded.

"Without Setsuden, Japan would have seen rolling blackouts during the summer months, when A/C usage is at its highest."

Farmers wage war on Fukushima radiation

As part of the Setsuden initiative, industries such as steel works and ceramics factories, which had taken themselves off the national grid in the 1980s and 1890s, fed their surplus power back to the grid to try to offset the shortages.

While that undoubtedly helped, Japan's electricity companies have become increasingly reliant on importing expensive fossil fuels such as Liquified Natural Gas (LNG).

According to figures from the Ministry of Finance, imports of LNG in 2012 were 11 percent higher than those before the 2011 tsunami.

When combined with a regional cost increase because of rising demand, spending on LNG in 2012 was $27bn higher than in the year before the Fukushima disaster, and gas now accounts for more than eight percent of Japan's imports.

Fuel costs for the nine Japanese electric power companies which own and operate nuclear power plants also increased by 94 percent from their pre-Fukushima levels of $36.2 billion in 2010 to $70.9 billion in 2012's fiscal year.

Dr Scalise told Al Jazeera that this solution was not one that could be used in the long-term.

"It's not sustainable at all," he said. "The renewable energies industry is likely to grow quickly over the next few years, but that is easy when you’re starting from such a low base.

"The issue is that Japan doesn't have, for example, the deserts of the US, where you can put the solar and wind farms without protests from residents.

"Without nuclear power, the only option is LNG, coal or oil. At the moment, nearly 90 percent of electricity is coming from fossil fuels."

According to Dr Scalise, there are three possible options available to the Japanese government at this point, one of which would be to let the current situation continue and not re-open the nuclear reactors.

"This would just let the electricity companies' financial bleeding continue," said Dr Scalise. "And sooner or later they would have no choice but to declare bankruptcy.

"Obviously that option is not politically appealing."

The second solution involves the the government setting up a mass holding company for the nuclear assets in order to prevent the power companies from failing, although the complicated financial nature of this makes it unlikely.

The third, and in Dr Scalise's opinion, the most likely, involves getting the banks involved with the power companies to issue short-term low-interest loans until they are able to start re-activating nuclear operations and research on a small scale.

Public perception

It is public nervousness at the idea of unsafe plants that is delaying the re-starting of many of Japan's nuclear reactors.

A study by the World Nuclear Association shows that the longer the crisis drags on, the more people want to see a move away from a reliance on nuclear power.

By March 2013, 20 percent of people questioned wanted nuclear power to be abolished.

It is that public perception of fear and danger that has also led to the near-demise of the fishing and farming industry in and around Fukushima.

Fishing in the area has been banned due to some bottom feeding fish being found with radiation levels higher than the Japanese government's new "acceptable level" of 100 becquerels per kilogramme.

Shunsuke Managi, Associate Professor of Resource and Environmental Economics at Tohoku University, said that the infrastructure damage to fisheries after the tsunami totalled $10bn, but that there was also a loss of earnings caused by the continuing issues with safety and decontamination in the area.

"The fish further out [are] actually fine," he told Al Jazeera. "Closer to Fukushima the levels of radiation in the fish are higher than government standards - but those have been increased recently.

"In actual fact, fishermen in the area suffered a $2.6bn loss of revenue in 2011, and a further $1bn in 2012.

"In the prefectures beyond Fukushima there are no problems at all and fishing is continuing as normal."

Just days ago, however, as Fukushima again hit the headlines due to an increase in recorded levels of radiation, South Korea announced it was banning the import of all fish from Japan.

Japan had annual fish exports worth around $92m to South Korea, accounting for about 13 percent of its total fishing industry exports.

"It is damage caused by rumours," Professor Managi said.

"The group, for example, planning to export squid to Korea said their loss would be several hundred-thousand dollars.

"They are located in the north of Japan and are in no way related to Fukushima.

"This kind of rumour is understandable. The people of Korea are afraid because of the Japanese government's and Tepco's poor responses to the problem."

The farming industry, too, has taken a financial knock - as the competency of Tepco, Fukushima's operating company, and one of the largest energy corporations in Asia, was called into question.

Director of the Kyushu Institute of Technology in Japan, and volunteer for independent radiation monitoring group Safecast, Azby Brown told Al Jazeera that there was a lot of anger among farmers who had been removed from their homes:

"There are three groups: Those who have been evacuated with no real hope of returning, those who are hoping to return soon, and those that were not evacuated.

"It is a real blow, in some cases these farms were famous because the same family had been living their for centuries.

"There is a lot of anger among the farmers, those in the exclusionary zone need compensation. Realistically a lot of us feel the government cannot afford that.

"There has been compensation as far as relocation costs and things like that go, but looking to the long-term, there has been very little information about what is intended."

Brown said that some townships had said they were expecting people to soon be allowed to move back to the area - thus delaying the discussion of long term compensation.

Nuclear expert Imad Khadduri discusses the Fukushima meltdown

In the meantime, farmers are suffering - even those with land in areas no longer registering unsafe levels of radiation.

Farmers with land in the "Orange Zone", just beyond the worst areas, have sent samples of different crops to independent labs, and the majority have come back without levels surpassing those considered to be safe.

"Of about 10 million bags of rice tested, about 75 or 80 came back with higher levels than those allowed," said Brown.

"For the farmers, it is a human rights issue, they want to be allowed back on to their land, they know the risks and the environment they are in, and they want to be allowed to return."

Lack of trust

Even if they were allowed to return, it would be unlikely that the crops they produce would sell.

"They are suffering from the Fukushima name," said Brown.

"It is an understandable human reaction, if there is a choice of food then why would you choose one with this reputation.

"In reality, the standards set by Japan are the most strict in the world."

A plethora of mistakes in the handling of the Fukushima disaster have, however, made people distrustful of the government and whether food safety is being correctly monitored.

Even the most recent plans, and sizable investment from the government, to stop the radiation leaks have been met with scepticism.

Dr MV Ramana, a physicist specialising in issues of nuclear safety with the Programme on Science and Global Security at Princeton University said that he did not believe the scheme would succeed.

"This was reinforced when I heard about the primary component of the response: the frozen soil wall," he said.

"Not only is this strategy untested on the scale that is being contemplated, but this wall would be vulnerable to loss of power and possibly earthquakes." The 2011 tsunami which led eventually to the nuclear meltdown was caused by a 9,0 magnitude quake around 70km from the coast. More than 900 aftershocks have since been recorded in the area.

It is this lack of faith that is contributing to people's distrust of food coming from Fukushima, despite independent readings that support the government's findings that the majority of produce is safe.

"The Japanese public has every reason to distrust nuclear officials in that country," Dr Ramana said.

"Regaining that trust is going to take not just a lot of time - but a complete overhaul of the 'nuclear village', which hasn't happened and is unlikely to happen anytime soon."