Signs of growth in post-Fukushima Japan, say Stanford experts


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Workers prepare to install solar panels on a Japanese house, Jan. 2011.
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Nearly a year has passed since an earthquake triggered a tsunami that swept away entire communities on Japan’s northeastern coast, leading to a series of accidents at the Fukushima nuclear complex. Since the March 11 disaster, Japan is experiencing a growing sense of community, and it faces a potential opportunity for innovation in the energy industry and economy. Masahiko Aoki and Kenji E. Kushida discuss post-March 11 developments, and a related conference at Stanford scheduled for February 27.

Aoki is the Henri and Tomoye Takahashi Professor Emeritus of Japanese Studies, and director of the Japan Studies Program at the Shorenstein-Asia Pacific Research Center at Stanford University.

Kushida is the Takahashi Research Associate in Japanese Studies at Shorenstein APARC, and a Stanford graduate (BA ’01, and MA ’03).

One Year After Japan's 3/11 Disaster will bring together experts from Stanford, Japan, and Europe for a discussion of the major economic, political, energy, and societal challenges and growth in post-Fukushima Japan.   

Looking back a year later, what do you think are important lessons we can learn from March 11?

Masahiko Aoki: Japan has often faced disasters leading to the complete destruction of cities and enormous losses of life. In the last century alone, there was the great Tokyo earthquake of 1923; wartime damage in Hiroshima, Nagasaki, and other metropolitan areas; the Kobe earthquake of 1995; and so on. Each time, Japan rebuilt its life and infrastructure anew. Accepting the reality of a disaster and making efforts to rebuild is in a sense deeply embedded in Japan’s collective DNA. However, the March 11 disaster was not only just a natural disaster. People are now well aware that there were lots of elements of human and institutional error in terms of preparing for and coping with natural disasters. Recent geographical studies and historical documents reveal that large-scale earthquake-tsunami disasters comparable to March 11 have occurred four times in the last 4,000 years. It provides Japan with a good opportunity for thinking about how to build sustainable societies and cities.  

Kenji Kushida: Big shocks always cause big changes, and the type of change depends on the kind of shock. With March 11, there was the human tragedy of people literally getting washed away. It also raised the question of how to restructure energy markets, which is an area where outcomes in Japan can affect worldwide restructuring. This particular shock then is triggering a whole set of fairly slow moving, but very transformative changes that could take place over the next few years.

What trends are we seeing in Japan’s energy industry now, and what are the implications for Japan’s future energy policy?

Aoki: When I flew into Tokyo the day after the great earthquake, the city was quite dark. But by the summertime, it was not only lit up, but there was a blue hue to the light—this was due to the wide adoption of energy-efficient LED lighting. Even with the nuclear plants down and 25 percent of the electric capacity gone, there were no major blackouts thanks to energy-saving measures. This kind of incident motivates people to explore ways to innovate the energy industry. For example, Japan’s energy-efficient auto industry took off in the late 1970s in reaction to the Oil Shock.

Japan’s energy industry is currently run by regional monopolies. Tokyo Electric Power Company (TEPCO), for example, monopolizes everything from power generation to retail distribution. In the past, there had been an attempt to break up the different parts of the power monopolies into separate entities. But only a bit of reform was made because of very strong resistance from TEPCO. Now TEPCO is on the verge of insolvency, so Japan has a very good chance to restructure its power industry. People are again starting to think about breaking up the regional monopolies and about innovation, which several experts will discuss during our conference.

Kushida: We will also draw on Stanford’s being in California to think about how to prevent Enron-style market manipulation and rolling blackouts from happening in Japan. A lot of it has to do with the rules and regulations that create an energy market. In the tsunami-devastated areas of Japan, there is also a tremendous opportunity for ground-up investment in new forms of energy. Silicon Valley technologies and companies can help design the next generation of renewable, sustainable energy systems in those areas.
In Japan, there is a sense that people have rediscovered their ties to one another after the disaster.

-Masahiko Aoki, Director, Japan Studies Program

During the recovery, many Japanese citizens demonstrated a remarkable strength and collaborative spirit. Has this changed?

Aoki: Annually on New Year’s Day in Japan, a high-level Buddhist priest writes the calligraphy for a word representing the spirit of the people. This year he wrote “絆”“bond” (kizuna)signifying the ties both among Japan’s citizens, and between Japanese and the generous help and aid that poured in after March 11.

In Japan, there is a sense that people have rediscovered their ties to one another after the disaster. Before March 11, there was some worry that young people were not so concerned about others and about tradition. Many young people now want to become volunteers, and there is also a better sense of community.

What has the impact been on Japan’s economy, and what are the prospects for recovery?

Aoki: There is an increasing awareness that Japan cannot sustain the same kinds of export-oriented, manufacturing-based industrial structures it has over the past decades.

Since 2007, Japan’s net foreign exchange receipts from royalties, investments, and the like have exceeded those from trade. The economic structure is becoming less export oriented, so the March 11 disaster might trigger the acceleration of a more domestic-oriented economy. It might also lead to an increase in foreign direct investment, prompted in part by population aging and partly by appreciation of the yen. Japan will become more domestic market oriented, while at the same time more internationally active. A lot next year depends on what will happen with Europe’s economy, but otherwise the prospect for Japan’s GDP is not bad because of reconstruction demand.

Kushida: Recovering from March 11 presents a potentially more productive experience than the 2008 global financial crisis. In 2008, Japan’s exports dropped dramatically for a few months and then there was a sharp recession that recovered quickly. There was not a whole lot that people or companies could do, other than adjust to the potential decline. March 11 provides more opportunities for innovation at the company and individual level. 

As it is finding growth in the domestic market, Japan has been criticized lately for being “inward-looking.” But two things from this latest crisis are contributing to looking outward a little more. One is the sense of vulnerability and transience, so strengthening Japan’s economic base becomes a much more urgent matter. The second is that in the aftermath of the euro crisis, the very strong yen has also led to a huge move toward outward acquisitions that are becoming integrated with the domestic economy.