Japan: A Nuclear Powerhouse Dims

Amid fatal mishaps and scandal, the industry is in decline

With oil prices stuck at 20-year highs and Japan dependent on imported fossil fuels for 80% of its total energy needs, the Japanese nuclear power industry should be in a strong position to press its case as a source of new energy. After all, Japan relies for one-third of its electric power on nuclear reactors and is considered home to some of the world's most advanced nuclear technology. But instead of revving up output and laying the groundwork for cutting-edge plants, Japan has put plans for a new generation of self-sufficient reactors in deep freeze. That's because a series of mishaps at Japanese plants and coverup scandals have seriously blackened the image of nuclear power. The latest accident took place in August, when four workers were killed and seven others injured after a pipe carrying superheated steam ruptured at the Mihama plant in Fukui prefecture on the Japan Sea coast. That marked the second fatal accident in less than five years at a Japanese nuclear facility.

Indeed, while the government and the highly regulated electric power industry remain as committed as ever to nuclear energy, more plants are being shut down than completed. And the glitches that have plagued even the most advanced reactors have hurt Japan's reputation for top-notch technology. Plant equipment makers such as Mitsubishi Heavy Industries, Hitachi (HIT ), and Toshiba (TOSBF ) are feeling the pinch from declining demand at home and few takers abroad, as orders from other Asian nations such as China have failed to materialize.

The setbacks threaten to greatly delay, if not derail, government plans to increase use of nuclear power to 41% of energy needs by 2011. That goal included construction of a dozen new reactors to add to the current 53. And the government poured billions of dollars into the development of exotic technologies such as fast breeder reactors, which theoretically can produce more plutonium than they consume. The crown jewel of that effort was a $5 billion prototype fast breeder reactor named "Monju," after the Buddhist deity of wisdom. It was supposed to usher in a new nuclear era.

But in late 1995 -- just four months after producing its first electricity -- Monju was shut down when it began leaking sodium coolant. The problem was compounded when plant officials later admitted to releasing an edited videotape that played down the extent of the damage. Monju has been mothballed since then, and a district court ruling last year has forced the government to put off plans to restart it as soon as next summer. Despite a pledge from Prime Minister Junichiro Koizumi to move forward with the fast breeder program, some industry experts now say they may never be commercially viable. "In its current form, the technology is too complicated to commercialize," says Nobuo Ishizuka, a senior managing director at the Japan Atomic Industrial Forum.

The Japanese public has been more indulgent of the nuclear power industry than either the U.S. or Europe. But the accidents and ethical lapses have put a big dent in the industry's reputation. Sure, three new nuclear plants are slated to start operations in the next two years. But unless the industry can break out of its one-step-forward-two-steps-back cycle, Japan will remain reliant on fossil fuels for many years to come.

By Chester Dawson in Tokyo

    Before it's here, it's on the Bloomberg Terminal.