July 9 (Bloomberg) -- As central bankers lose sleep over inflation, one Japanese politician has a decidedly contrarian take on things: Bring it on.

``Inflation is inevitable and we should accept it and welcome it,'' says Wataru Aso, governor of Fukuoka Prefecture in western Japan.

No, Aso hasn't lost his mind. Yet he may just be the only elected official in the developed world -- or developing, for that matter -- who relishes the return of inflation. The 69-year- old says rising costs will precipitate the innovation that Japan so badly needs.

While central bankers such as Masaaki Shirakawa of Japan, Ben Bernanke of the U.S. and Jean-Claude Trichet of Europe would disagree, Aso's point has some historical merit. It's hard to think of an economy that had more success in reducing energy use since the last oil shock in the 1970s.

Japan is playing up that progress at this week's Group of Eight summit on the northern Japanese island of Hokkaido.

``Superior technology and a national spirit of avoiding waste give Japan the world's most energy-efficient structure,'' Prime Minister Yasuo Fukuda said in a speech last week. Japan, he said, ``wants to contribute to the world.''

Aso wants Japan to contribute to its own economic outlook.

Mad Max World

There's little doubt that soaring energy costs will undermine growth in the short run. Sentiment among Japanese merchants fell to a six-year low in June as higher oil prices discouraged spending. The Economy Watchers Index, a survey of barbers, taxi drivers and others who deal with consumers, dropped to 29.5 in June from 32.1 the previous month, Japan's Cabinet Office said yesterday.

When economists search for silver linings in accelerating inflation, some argue it will create a buy-now mentality that boosts spending. Taking a longer-term perspective, though, Aso suggests the mere specter of a ``Mad Max'' world is more of an opportunity for Asia than a problem. The reference here is to the 1979 film starring Mel Gibson -- an apocalyptic tale about how society devolves as oil becomes more scarce.

``It certainly is one of those scenarios that would have seemed highly unlikely a year ago,'' says Takeo Sumino, a managing director at Nomura Securities Co. in Tokyo. ``The rise in inflation will cause pain in the short run.''

Adds Roger Nusbaum, a portfolio manager at investment firm Your Source Financial in Phoenix: ``That society could devolve into some sort of Mad Max movie with gasoline being the most prized thing seems very difficult to imagine.''

`Rare Chance'

Even if crude oil weakens from about $140 a barrel, the world has been warned.

``We now have a big incentive to change,'' Aso says. ``This is a rare chance for Japan, and indeed, Asia, to embrace innovation in ways that wouldn't happen without inflation.''

Aso takes pride in a variety of Fukuoka companies that make diesel fuel out of discarded edible oils, produce more efficient hydrogen and solar energy, and build businesses to meet global demand for recycling technologies.

One such company is Xenesys Inc., whose technology owes much to research done at Saga University, located near Fukuoka. The Tokyo-based company was created amid the realization that existing energy supplies and technologies can't meet the needs of increasing demand. It produces electricity from small differences in ocean temperatures.

Japan's Strengths

Former Sony Corp. Chief Executive Officer Nobuyuki Idei is often quoted as saying that even if the world is preoccupied by oil, the 21st century will be about water. Earlier this year, he became an executive adviser to Xenesys. It was a major coup for the company, given that the mission of Idei's two-year-old company Quantum Leaps Corp. is raising the profile of innovators and inspiring entrepreneurship.

``What the company is doing is a reminder of how Japan can use its strengths and profit from them,'' Idei says.

The strengths that Idei has in mind include the nation's impressive conservation record. Not only is it an opportunity for Japan to play a rare leadership role on a global issue. It's also a potentially lucrative export for an economy trying to compete with China, India and Southeast Asian upstarts.

That's where Aso comes in. His government is helping to push the idea of a Silicon Sea Belt, an Asian epicenter of innovation akin to California's. What Aso calls the ``semiconductor belt zone'' includes Fukuoka in Japan; Gyeonggi in South Korea; Beijing, Hong Kong and Shanghai in China; Hsinchu in Taiwan; Singapore; Kuala Lumpur; and Bangalore in India.

It's easy to dismiss such efforts: Asia is too disparate to cooperate technologically, there's too much distrust among governments, and oil prices will distract leaders from longer- term thinking. Yet Asia needs more contrarians of Aso's ilk. Rather than panicking over rising prices and a Mad Max-like outlook, why not make the best of them?

``We can overcome this bottleneck,'' Aso says. ``There's no reason to be so pessimistic.''

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Fukuoka, Japan, at wpesek@bloomberg.net

Last Updated: July 8, 2008 14:01 EDT