Japan Ending Nuclear Age Risks $5 Trillion Economy as Komatsu, Sharp Walk
Japan’s Fukui prefecture helps Sharp Corp. make solar cells, generates cash for BHP Billiton Ltd. (BHP) and keeps the lights on in the Kansai area, which has an economy the size of Mexico’s and is home to Panasonic Corp.
What makes Fukui key to production of global brands is the reason it got the nickname “Nuclear Ginza.” The prefecture on the Japan Sea coast north of Osaka is home to 14 reactors in atomic plants, the highest concentration in the world.
The power lines that snake out hundreds of kilometers from the town of Ohi -- with four reactors and a population of 8,700 -- and three nearby atomic plants supply 49 percent of Kansai’s electricity. The region is about the size of Belgium and includes Kyoto and Osaka, the world’s seventh-largest metropolis. Sharp and Panasonic have factories in the area, along with Toshiba Corp.’s that makes chips used in the iPad.
After the Fukushima nuclear disaster, Prime Minister Naoto Kan said Japan needs to learn to do without atomic energy and 77 percent of respondents in an Asahi newspaper poll published July 12 agreed with him. Shunichi Teramae, the mayor of Kaga city on the border of Kansai, has a different view.
“Without nuclear power the Kansai economy will collapse, and so will Japan’s economy,” said Teramae in an interview, adding his town gets no subsidies from the nuclear industry.
Nor will it stop at Japan’s $5 trillion economy.
A collapse in manufacturing will affect companies from Toshiba-supplied Apple Inc. (AAPL) to BHP Billiton, which has more than 10 percent of revenue directly linked to Japanese coal, ore and copper concentrate sales, including to Kansai plants. Apple and BHP declined to comment on Japan’s energy issues.
Japan’s reliance on nuclear power will be reduced in three stages, the first being the next three years, then by 2020 and then through 2050, Kan said today after a meeting with his ministers. The new energy strategy will consider how to separate power generation and distribution and encourage “various operators” to enter the electricity market, Kan said.
“We’ve decided to reduce nuclear dependence and make a road map toward that goal,” Kan said in a televised address later in the day. “As the government, we’ll reduce reliance on nuclear energy in a planned, step-by-step manner to achieve a society that doesn’t depend on nuclear energy.”
A Japan without nuclear generation and reliant on Kan’s goal to get 20 percent of its power from renewable energy would add 1.66 trillion yen ($2.1 billion) a year to the power bill for Japan Iron and Steel Federation members, the association said July 19.
Abandoning nuclear power risks hollowing out Japan’s industry as companies like Komatsu Ltd., the world’s No. 2 maker of construction machinery, say they can move abroad “whenever we want,” taking jobs and taxable revenue with them, Chairman Masahiro Sakane said. Prime Minister Kan’s nuclear-free vision doesn’t consider all the issues, he said.
“Power supply is an uncertain factor for companies and companies don’t like uncertainty,” said Hideo Kumano, an economist at Dai-Ichi Life Research Institute Inc. “A disruption to Japan’s supply chain from power shortages would lead to global supply chain disruptions.”
Global automotive output slowed for weeks after the 9- magnitude earthquake on March 11 in Japan stopped factories of suppliers like Renesas Electronics Corp., the world’s biggest maker of microcontrollers used in cars and mobile phones.
Japan makes 44 percent of the world’s audiovisual equipment, 40 percent of the electronic parts, 19 percent of semiconductors and about 20 percent of all technology products, according to CLSA Asia-Pacific Markets research.
This summer, that manufacturing base is operating amid power shortages in several parts of the country, including Kansai. Of Japan’s 54 reactors, 38 are idled or inactive as local officials block restarts of units closed for maintenance and safety checks since the earthquake and tsunami wrecked the Fukushima Dai-Ichi station, causing radiation leaks.
Gross domestic product will fall by 3.6 percent and 200,000 jobs may be eliminated if all of Japan’s reactors close by next spring as scheduled maintenance takes them offline, the Tokyo- based Institute of Energy Economics said yesterday in a report.
“Even if we’d like to build a new plant in Japan, the trend is to move abroad, much as we hate to admit it,” NEC Corp. Chairman Kaoru Yano said at a seminar hosted by the Keidanren business lobby this month. “The quickest solution to the power supply problem would be to restart the nuclear reactors.”
The rise of Japan’s manufacturing after World War II to dominate the global auto and electronics industries came in lockstep with promotion of nuclear power to reduce the country’s dependence on imported oil. Japan passed laws on nuclear subsidies to develop the industry in 1974, a year after the global oil shock sent its economy into a recession.
Ohi Mayor Shinobu Tokioka smiles when asked how Japan would switch its energy source from nuclear to renewables.
The town’s four reactors transmit energy 120 kilometers south to power Osaka. Sharp’s solar project in Sakai, next to Osaka, is designed to produce 470 times less power and lacks light during the three winter months, Tokioka said.
“The nuclear industry provides jobs and is a customer for goods and if we scrapped reactors we’d have energy shortages,” the mayor said in an interview in his office.
Those shortages now look more likely as Kansai Electric Power Co. has just 4 of its 11 nuclear reactors in Fukui in operation. The rest are closed for maintenance or malfunction, with no date for a restart. This may leave the region in short supply of power for up to five years, according to an Asahi newspaper report.
The nuclear industry’s reliable power supply has come at a cost. Even prior to the Fukushima nuclear disaster and radiation fallout, the Kashiwazaki Kariwa nuclear plant leaked radioactive water after an earthquake in 2007.
Both Tokyo Electric Power Co. and Kansai Electric have admitted in the last decade to falsifying nuclear safety reports.
Just this week, Chubu Electric Power Co. said that it has been unable to remove a damaged fuel rod from a reactor for 17 years.
Still, asking renewable energy to take the place of nuclear over the next 20 to 30 years is unrealistic, said Kazuharu Kawase, mayor of Tsuruga city, which is 50 kilometers east of Ohi and hosts two nuclear plants.
“Natural sources of energy are important and an effort should be made to make these sources more widespread,” Kawase said. “But changing everything over to natural energy will be difficult because of location, climate and costs.”
Kan has said Japan can reduce the cost of solar power and boost renewable energy to 20 percent of the total by the end of this decade from 1 percent now.
“Prime Minister Kan’s commitment is very, very ambitious,” said Yugo Nakamura, an analyst with Bloomberg New Energy Finance. “If the government really wants to shift to that it’s technically possible, but it’s challenging and costly. We need to know who will pay the very high price.”
Manufacturers like Mitsui Mining & Smelting Co. said they won’t stick around to find out.
Japan’s biggest zinc smelter said it will move production abroad on concern a Japan without nuclear power will have electricity shortages.
“In the medium term, we will have no choice but to move our factories overseas” to gain access to stable power supply, said Keiji Nishida, general manager of Mitsui Mining’s finance team. That view was echoed by Sharp Chairman Katsuhiko Machida at a briefing in Osaka July 15.
“Manufacturers here have faced endless obstacles such as foreign exchange rates, corporate tax and environmental and labor regulations. This issue over power supply could be the end of manufacturing in Japan.”
The loss of jobs from an exodus of Japanese manufacturers would again delay the economy’s exit from deflation and to pay back a debt burden that’s swelled to twice the size of the economy.
“The images from Fukushima were paralyzing,” says Shigeo Ishihara, mayor of Omaezaki, home to the Hamaoka plant that Kan asked to shut down after the March disaster. “But if we don’t keep these reactors operating, Japan’s economy will wither --our young people will move abroad, leaving the country with only grandpas and grandmas.”
Omaezaki expected 44 percent of its budget this year to come from nuclear industry-related income. It breaks down to 472,000 yen ($5,900) a resident, about 30 percent more than any of the three municipalities it borders.
The joining of Japan’s industrial might with atomic power has produced “a single economic structure” replicated throughout the country with a nuclear plant at its center, said Shinichiro Tonooka, a history professor at Tsuruga College, which is part-funded by subsidies the city gets for hosting two nuclear stations.
“The overwhelming majority of residents benefit economically from the atomic station,” Tonooka said. Until Japan has a viable alternative, nuclear will need to keep powering the country, he said.
A short winding road leads from Ohi’s nuclear plant to the Sodegahama beach where pleasure boaters and amateur fishermen flock in the summer months. Near the beach stands a three-story community center owned by the town, quiet and empty.
Inside, Kunie Ishida has little to do. She recollects when Kansai Electric took locals to watch comedy shows in Osaka and how residents living at the tip of the peninsular had to travel by boat to reach the main coast before the utility built the bridge.
“We’re all grateful to the power plant,” Ishida says. “The stuff with Fukushima looks troubling, yes. But, here everyone supports the power plant. Ohi’s is the safest plant.”
To contact the editor responsible for this story: Teo Chian Wei at firstname.lastname@example.org