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 Recent geographical studies and historical documents reveal that large-scale earthquake-tsunami disasters comparable to March 11 have occurred four times in the last 4,000 years.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

China possesses vast coal reserves, and coal accounts for 70 percent of the country’s total energy consumption—3 billion tons per year. But China also consumes oil, natural gas, and an increasing amount of renewable energy.

Xuteng Hu, a Corporate Affiliates Visiting Fellow Program alumnus (2007–08), manages energy and materials development projects at PetroChina’s Petrochemical Research Institute in Beijing, where he serves as vice president.

Hu received his master’s and doctorate degrees in chemical engineering from Tsinghua University. 

PetroChina, one of China’s largest energy companies, has recently developed its own biojet fuel. The company is also researching other renewable energy technologies, including biofuel made from plant fiber.

During his year at Stanford University, Hu conducted research on the governance of China’s state-owned enterprises, focusing on energy companies like PetroChina, Sinopec, and China National Offshore Oil Corporation. He also studied strategies for the development and promotion of different forms of energy, ranging from coal to chemicals and oil to natural gas. Jean C. Oi, a political science professor and director of the Stanford China Program, served as Hu’s research advisor.

Since returning to China three years ago, Hu has managed the research and development of synthetic petroleum-based materials, and the construction of major pilot petrochemical plants. Perhaps most exciting of all, the biojet fuel project he led conducted a successful demonstration flight in October.

Of his time at Stanford, Hu says: “My experiences helped me think about corporate governance structure, energy development, and other issues related closely to my work from different perspectives, such as culture and society. It also enhanced my understanding of cultural and business exchanges between China and the West.”

Phillip Lipscy, an assistant professor of political science and a center fellow at the Freeman Spogli Institute of International Studies, is currently conducting research on energy efficiency and financial crisis response. Here he discusses his recent research within the context of contemporary Japan, and comments on current social and political conditions in Japan after the March 2011 disaster.

What is the primary focus of your research right now?

One focus is on the politics of energy efficiency. I am exploring the question: Why do some countries, like Japan, pursue very aggressive efficiency measures, while others, like the United States, choose not to?  

I am also researching the politics of financial crisis response. My key research questions include: What political factors determine the speed and effectiveness of crisis response? When do countries act decisively? What policies are chosen and under what conditions?

In your recent research about energy-efficient policymaking, what are some of the cases and issues in Asia that you have explored?

Japan is a very important case. Its economy is one of the most energy efficient in the world based on measures such as energy intensity. There are a lot of questions, however, about whether any of that is due to policy measures.

I have been examining Japan’s transportation sector with Lee Schipper, a senior research engineer at Stanford’s Precourt Energy Efficiency Center, and our findings are counterintuitive. Most of Japan's relative advantage in transportation sector efficiency is not due to automobile fuel economy, which is what the Japanese government tends to play up. Instead, Japan is characterized by an abnormally high rail share and less total distance traveled. [A great loss to the Stanford community, Dr. Schipper recently passed away. More information is available here.]

What I show in my research is that Japan's efficiency achievements are closely tied to traditional pork barrel politics. High costs have been imposed on the general public—for example, through automobile taxes and highway tolls. The revenue from these measures was traditionally redistributed to key constituencies of the Liberal Democratic Party (LDP), namely rural residents and the construction industry.

This arrangement worked nicely for several decades, reducing energy consumption while also helping to keep the LDP in power. These arrangements, however, have become unsustainable with political changes since the 1990s, particularly the coming to power of the Democratic Party of Japan. These political changes have put Japan's energy efficiency policy in a state of flux. The current electoral system makes it more difficult to impose diffuse costs on the public—such as through gasoline or CO2 taxes—but there is no obvious alternative mechanism.


A young boy helps with clean-up efforts after the March 11 earthquake and tsunami. (Flickr/DJ Milky)

As far as you can speculate at this point, what impact do you think that the Fukushima nuclear disaster will have on Japan’s future energy policy?

Before the Fukushima disaster, Japan had planned to increase electricity generated by nuclear power to 50 percent by 2030. These plans are almost certainly going to be shelved. Prime Minister Naoto Kan recently announced plans to gradually move away from nuclear power in the coming years.

This discussion is not unique to Japan. Germany, Italy, and Switzerland have all recently announced anti-nuclear policies in response to Fukushima. On a recent trip to Taiwan, I found a similar discussion underway there. Taiwan, however, is very similar to Japan in terms of its high dependence on energy imports. This dependence creates a dilemma.

Japan's economy is already one of the most energy efficient in the world, making it more difficult to realize incremental energy savings through efficiency gains. Oil and natural gas are volatile and subject to geopolitical shocks. Renewables are not yet able to meet the kind of energy demand you have in a large economy like Japan. For the foreseeable future, less nuclear energy means higher costs and greater dependence on fossil fuels. That is going to have negative implications for energy security and climate change.

You recently returned from a trip to Japan. What is your perception of the way that everyday people are dealing with the triple disaster that took place in March? What is your assessment of the political situation?

The most remarkable thing is how quickly the Japanese people came together to support disaster victims and conserve energy. There was an outpouring of help, especially volunteer activities and financial contributions. People are taking energy conservation seriously, keeping air conditioning off even during the unbearably humid summer.

The situation at Fukushima was a big blow to the national psyche though. There have been some media reports overplaying the dangers of radiation, and people are deeply concerned about food safety.

Unfortunately, the political situation has been truly tragic. Even for a political scientist like myself, the inability of Japanese leaders to come together after the disaster is troubling. It took less than a month after the earthquake for bickering and squabbling to return full force. On a more positive note, local government leaders and some private sector actors have filled the void to some degree.

It was striking to find how much the Japanese private sector was stepping in to take over functions that we generally associate with government—things like disaster relief, provision of supplies, and screening food for radiation contamination.


A view of the floor of the Tokyo Stock Exchange. (Flickr/Stefan)

What publications are you currently working on?

I just finished a manuscript, co-authored with my former student Philippe de Koning, on how Japan's defense establishment has dealt with fiscal austerity over the past decade. Now that the United States and Europe are dealing with similar pressures to cut back defense spending, we wanted to see how Japan had managed. We found that Japan's defense planners have fared relatively well within the domestic budgetary process, but they are in an extremely tough situation. Without a major change in  policy, when the short-term coping measures being implemented today run  their course over the next decade, Japan will face a sharp reduction in its military capabilities.

In addition, I collaborated during the past academic year with Hirofumi Takinami, a Shorenstein APARC Visiting Fellow from Japan’s Ministry of Finance, to examine lessons from Japan’s financial crisis in the 1990s. We looked at the extent to which the United States took these lessons into account when it encountered its own economic downturn in 2008. We found that Japan's crisis influenced the U.S. response quite a bit, but there was some variation by policy area based on the degree of politicization. For example, in monetary policy, which is technocratic and politically insulated, the lessons from Japan were implemented quickly. It was slower for financial sector bailouts though, and especially so for fiscal policy.

In this coming academic year what are the courses that you will be teaching?

I will be teaching a graduate seminar on political economy, primarily intended for PhD students in political science, as well as an undergraduate course on the politics of financial crisis.

Japan's massive earthquake and tsunami three weeks ago and the challenging recovery process continue to make news headlines around the world. It is difficult to separate fact and reasonable speculation about the future from the terror-filled coverage about radiation leaking from the Fukushima nuclear complex. In an effort to make sense of recent events, the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC) convened a panel of experts for a discussion about the possible future implications arising from this complex and emotionally charged situation for Japan's energy policy, economy, and politics.

Addressing an audience of one hundred students, faculty, and members of the general public on March 30, Shorenstein APARC associate director for research Daniel C. Sneider expressed the center's deep sympathy for those affected by the natural disasters and its profound admiration for the way in which the people of Japan are dealing with the aftermath. Members of the panel echoed these sentiments throughout the event.

Michio Harada, Deputy Counsel General at the Consulate General of Japan in San Francisco, cited official government figures indicating that, as of March 28, twenty-eight thousand people were dead or missing and one-hundred-and-eighty thousand people were still in evacuation shelters. Faced with such staggering figures, Japan remains in a rescue and recovery phase, he said, but is receiving a tremendous amount of global support. More than one hundred and thirty countries have provided financial assistance, and eighteen countries and regions have sent rescue teams. Collective public spirit is currently very strong, Deputy Counsel Harada emphasized. Japan's challenge moving forward, he suggested, will be to adopt pragmatic measures to fund reconstruction projects in the areas destroyed or damaged by the natural disasters.

Understanding the situation at the Fukushima nuclear power facility and the information circulating about the potential health risks of radiation exposure is complicated, stressed Siegfried S. Hecker, co-director of the Center for International Security and Cooperation. He described the intricate design and structure of the reactors and outlined the sequence of events up to the present, explaining the immediate, crucial challenge of continuing to cool the reactors and deal with the leakage of radiation from them. While there are definite and potentially very serious health threats from radiation exposure and contamination, Hecker said, fear and stress about the situation could also negatively affect mental and physical wellbeing. It is too soon to know the long-term implications for energy policy in Japan and other countries, he suggested, emphasizing the significance of learning from this experience in order to improve any future use of nuclear power.

Robert Eberhart, a researcher with the Stanford Program on Regions of Innovation and Entrepreneurship, proposed that the global supply chain is flexible enough to absorb any manufacturing disruptions in Japan. He noted that in the past twenty years most of Japan's heavy manufacturing has moved overseas, and that the components made there are a comparatively less significant part of the supply chain. In terms of the overall impact on Japan's economy, Eberhart suggested that the net effect on the GDP would be neutral over the next two years, explaining that the imminent loss of business and investment in some areas would be offset by the growth of firms involved in the reconstruction process.

Phillip Lipscy, a center fellow at the Freeman Spogli Institute for International Studies and an assistant professor with the Department of Political Science, stated that events and immediate needs during the early stages of reconstruction may have long-term affects on policymaking and the government structure in Japan. For example, the continued use of nuclear energy—a relatively clean and efficient source of power accounting for 30 percent of Japan's total energy consumption—will face public opposition due to rising concerns about safety and pressing energy needs. In addition, while Prime Minister Naoto Kan's prompt response after the natural disasters helped boost popular sentiment for him and the Democratic Party of Japan (DPJ), how they fare in the long term—especially with regard to the DPJ's relationship with the opposition Liberal Democratic Party and reconstruction-related modifications to its key economic policies—remains to be seen, Lipscy said.

Sneider closed the event with a comparison between the events in Japan and the April 2010 Gulf of Mexico oil spill, pointing to criticism that the Obama and Kan administrations have received for not regulating large corporations closely enough. A prompt resolution to the dangerous—and contentious—situation at the Fukushima nuclear complex is the most immediate concern, and one that will help foretell the long-term political implications for Japan's government, he concluded.

Although there is still a long road ahead in Japan—especially until the accident at Fukushima's nuclear reactor is contained and the actual after-effects of radiation are better understood—the underlying message during the panel discussion was that Japan will indeed recover and that the terrible events of the past weeks have brought people—and even the competing political parties—closer together.