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 Recent geographical studies and historical documents reveal that large-scale earthquake-tsunami disasters comparable to March 11 have occurred four times in the last 4,000 years.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.

After 10 years of rapid growth, China will undergo a major leadership transition later this year. Two recent Shorenstein Asia-Pacific Research Center edited volumes -- Going Private in China and Growing Pains -- put China’s development into context as the country prepares for the next decade of its future.

Since Kim Jong Il’s death on Dec. 17, North Korea has a young new leader: Kim’s 28-year-old son Kim Jong Un. What does the new leadership hold in store for the future of the Korean Peninsula, U.S.-Korea relations, and the stability of Northeast Asia? David Straub, who attended the seventh U.S.-Korea West Coast Strategic Forum in Seoul just days before Kim’s death, shares highlights from the Forum and offers insight into the current North Korea situation.

Straub is associate director of the Korean Studies Program at Stanford University and a retired senior U.S. foreign service official with over 30 years of Northeast Asia experience.

The U.S.-Korea West Coast Strategic Forum is held semi-annually, alternating between Stanford and the Sejong Institute in Seoul.

The West Coast Forum opened with a discussion about the current situation in North Korea. After Kim Jong Il’s death, how much do you think that picture will change?

Most Forum experts believe there will be relative stability in North Korea for some time to come.

The reason Kim Jong Il chose Kim Jong Un as his successor is because he is the least controversial person in North Korea to succeed him. Anyone else would be the object of great suspicion and jealousy within the elite there.

North Korea has already had one succession—from founder Kim Il Sung to his son Kim Jong Il—and that went smoothly. The succession from Kim Jong Il to his youngest son Kim Jong Un is natural within that context—it is a dynastic succession. As with other dynastic successions, the easiest person to accept is normally someone who represents a continuation of the person in power.

Do you foresee possible areas for improvement in relations between North and South Korea or for negotiations over North Korea’s nuclear program?

Apr. 15 is the 100th anniversary of Kim Il Sung’s birth, which is going to be a large celebration. North Korea probably will want to commemorate it without a lot of distractions. The North Korean leadership also wants to provide more food and supplies to its people, and provocations toward South Korea would make it harder to get international aid. 

A number of Forum experts are concerned that North Korea might conduct another nuclear or long-range missile test this year. Most tests so far have not been fully successful, so from a military and technology perspective they probably want to try again. North Korea has been slapped with international trade sanctions for its previous tests, but China has always stepped in to help. Sanctions will probably not deter the North Koreans from conducting future tests.

As far as inter-Korean relations are concerned, it is unlikely that North Korea will take any major new initiatives toward the South. The leadership does not like conservative South Korean President Lee Myung-bak because he came into office saying that he would not continue giving large-scale aid to North Korea until it abandoned its nuclear weapons program. That was contrary to the Sunshine Policy of his two progressive predecessors.

President Lee’s term is almost up, and South Korea will hold a hold a presidential election on Dec. 19 this year. North Korea probably hopes that the progressives will win the election and restore the Sunshine Policy.

Will North Korea be a major issue for debate in South Korea’s upcoming 2012 presidential election?

Current polling shows that North Korea is the top concern of only 8 percent of the South Korean electorate. As in the past, the main issues for voters there are the economy, their standard of living, and social welfare issues. North Korea will not be the top issue unless something very dramatic happens between now and the election. On the other hand, if the race is close, feelings about North Korea policy could help to decide the outcome.

Among South Korean citizens, is there more fear or hope—or maybe a mixture of both—about North Korea’s new leadership?

Recent opinion polls show that 80 percent of South Koreans feel that North Korea will not give up its nuclear weapons. There is not much reason for optimism. That being said, most South Koreans are concerned about North Korea’s 2010 attack of Yeonpyeong Island and hope for improved relations. And, of course, Kim Jong Un is a different leader and most South Koreans hope he will move in a more positive direction. But they feel it is unlikely to happen in the next few years—if ever.

Does uncertainty over the future of North Korea have the potential to impact or strengthen any aspects of the U.S.-South Korea alliance?

This year, the U.S. and South Korean administrations will likely focus on managing the North Korean situation and continue to prioritize the U.S.-South Korea alliance. The two countries closely cooperate on North Korea policy.

The real question for the alliance in terms of North Korea policy will be who is elected as president in both countries. If a progressive South Korean candidate wins, that person will probably pursue some variation of the Sunshine Policy. Especially if a Republican is elected in the United States, we may see echoes of the difficult U.S.-South Korea relationship we had during the George W. Bush administration.

If President Obama is re-elected, another South Korean Sunshine Policy would also pose challenges. The administration has taken a very firm position that the United States will not significantly improve relations with North Korea until it gives up its nuclear weapons program. South Korea’s Sunshine Policy focuses on embracing North Korea in the hope that relations will improve over time and that North Korea will eventually voluntarily give up its nuclear weapons in that long-term context. 

China, the country in Northeast Asia with the most influence over North Korea, recently issued a statement in support of Kim Jong Un. Does this signify any major change in relations between these two countries?

The Chinese government has particular interest in North Korea. China is focused on developing its own economy, including the relatively poor northeastern area that borders North Korea. The last thing China wants is instability on the Korean Peninsula, which would detract from its economic development.

China does not believe it can force North Korea to give up its nuclear weapons without risking instability. In the absence of progress in the Six Party negotiations over North Korea’s nuclear program, China has unilaterally increased economic and diplomatic support for North Korea. Its support is independent of who serves as the North Korean leader.

China tried very hard to get Kim Jong Il to open up the North Korean economy more, but did not succeed, primarily because Kim feared that doing so would also allow in more outside information and undermine his regime. China probably hopes that the younger Kim Jong Un may eventually have not only the power but also the desire to reform the economy.  

The past year unfolded with Japan’s unprecedented triple disaster and closed with U.S. Secretary of State Hillary Clinton’s historic trip to Myanmar. Moving into 2012, Europe’s economy creaks along uncertainly and China gears up for a major leadership change. In an interview with the Ukranian magazine Glavred, political science professor Phillip Lipscy discusses landmark Asian economic and political events of 2011, and what they could mean in the coming year.

What was the most significant event in terms of Asia’s economy in 2011?

The March 11 Great Tohoku earthquake and tsunami: Besides the tragic loss of life and property, the disaster disrupted global supply chains and plunged the Japanese economy into a recession. The nuclear meltdown in Fukushima also led many countries to question the future of nuclear energy—this will have long-lasting consequences for global energy markets and efforts to deal with climate change.

What was the most significant political event?

Signs of political opening in Burma/Myanmar could have profound consequences not only for that country but for the rest of Asia as well. Hillary Clinton became the first U.S. Secretary of State to visit the country in 50 years. Aung San Suu Kyi has been released from detention and the National League for Democracy has re-registered as a political party. If this leads to democratization, it will be remembered as an important turning point.

What new policy and economic trends appeared in 2011? Which of them will continue into the coming year?

There seems to be a subtle shift in views towards China's economy. Chinese government officials are deeply concerned about the "middle income trap." China has reached a level of development where many countries saw their economic growth slow down sharply. Rising incomes are eroding China's advantage in low-cost manufacturing. There is much talk of multinational companies relocating their operations to even cheaper countries, such as Vietnam. This is an important transition for China, and it will remain an important issue in coming years.

In terms of people, who do you feel was the most notable, and who was
the most disappointing this past year?

The people of Japan, who responded with remarkable perseverance, order, and discipline to such a tragic natural disaster.  

The most disappointing were the political leaders of Japan, who could not set aside
their differences and come together for the sake of their country.

Will China continue to spread its influence in 2012, and might any countries oppose this process?

China is now the second largest economy in the world and an important military power. It is inevitable that China will rise in international stature and influence. However, Chinese leaders also face some important challenges—rising inequality, an overheated housing market, and bad loans in its financial system. The focus of international attention should be on integrating China into the world order as a peaceful, responsible stakeholder—not on confrontation.

What impact could the economic crisis in Europe have on the economics and international policy of the Asia-Pacific region?

If the financial crisis in Europe is mismanaged, nobody will escape the consequences. Europe is a crucial export market for Asian countries, and European financial institutions are major lenders to emerging economies in the region. Equally as important, repeated financial crises and political mismanagement in the United States, Japan, and Europe could begin to undermine perceptions of democratic government and capitalism.

What will be most important event in Asia next year?

China's leadership transition, particularly given the many immediate challenges the country faces.