Nuclear Meltdown Feeds Tokyo’s Inertia
Ten weeks after the earthquake and tsunami, it’s tempting to give Japan a new name: Tepco Nation.
What else is the world to think? Tokyo Electric Power Co.’s shameful mismanagement of the melt down at the Fukushima Dai- Ichi nuclear plant has cast a real and figurative radioactive cloud over Japan’s economy. And yet leaders here still are coddling a company vilified globally on a level that matches BP Plc at the height of last year’s Gulf of Mexico oil-well blowout.
Japan once indulged in the notion that its economy was a macro version of Toyota Motor Corp. (7203), a name associated with innovation, quality and the nation’s powerful rise from the ruins of World War II. No one is happy about the Tepco-ization of Japan’s reputation. Until now, Tepco was a symbol of the incestuous ties between government and industry. Today, it’s emblematic of something more dangerous: a leadership vacuum at the worst possible moment.
Last week, Tepco President Masataka Shimizu took the fall for decades of doctored safety reports and disregard of seismic risks that set the stage for the worst nuclear crisis since Chernobyl. Tepco’s idea of change was to replace him with a 36- year company veteran.
Investors were quick to pummel Tepco for its cluelessness. They drove the cost of insuring its debt from default well above the record prices set by BP during the oil spill. In doing so, markets gave little weight to the fact that Japan’s largest utility has government backing, something BP lacked. This, in effect, is a no-confidence vote on Japan’s corporate and political establishments.
It’s a valid verdict. The March 11 disaster did more than push Japan into its third recession in a decade. It highlighted how leaders from Prime Minister Naoto Kan on down act as if it’s still business as usual in a capital beset by an extraordinary crisis.
If Tepco is the poster child of Japan’s culture of corporate complicity, Toyota illustrates how human error exacerbated the tsunami, derailing the world’s third-largest economy. In the first quarter, Toyota’s profit dropped 77 percent from a year earlier, and that’s a preview of what’s to come nationally.
Damaged Toyota factories, power outages, supply-chain disruptions, plunging domestic demand and worries overseas that Japanese goods are contaminated with radiation are weighing on a company still dusting itself off from the multiple recalls of 2010. Now, as the yen surges, Toyota, which built 45 percent of its cars in Japan last fiscal year, is looking at producing more of them abroad.
Meantime, thanks to power cuts, the center of Toyko, once hyper-modern and neon-sign-crazy, at times now feels like Asia’s answer to Amish country.
Not surprisingly, demands for Kan -- the fourth Japanese premier since President Barack Obama took office -- to step down are growing louder. His public approval is about 26 percent, less than half the level after he became prime minister last June, the Asahi newspaper reported last week.
Kan’s Democratic Party of Japan and the opposition Liberal Democratic Party refuse to join hands to rebuild the nation’s shattered confidence. And there’s still the expectation that the Bank of Japan (8301) will somehow bail out the economy, even though its stimulus efforts have failed for two decades to end the bust that followed the bubble years of the 1980s.
The DPJ and LDP are barely on speaking terms. Each party is more concerned with scoring cheap political points than revitalizing the nation. The government lacks plans to rebuild, end the nuclear crisis, avoid credit-rating downgrades, prepare for an aging population, end deflation and boost competitiveness. Confidence in the future dwindles further, reducing both consumption and business investment.
Japan needs a grand coalition. The parties should put aside pettiness and merge for a time, so they can work to restore normalcy for the nation’s 127 million people. Their most urgent challenge is to rein in Tepco, perhaps even break it up, before its failings do more damage to the Japan brand.
Tokyo needs to recognize that this is not a passing event. Unless the leaders get to work, Japan’s economic prospects will dim along with the neon signs around the nation.
(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)
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