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JAPAN: New Year Brings Economic Aftershocks

Suvendrini Kakuchi

AIZUWAKAMASTU, Japan, Jan 1 2012 (IPS) - Hideo Sato, 47, and his family escaped to this snowy city 200 km from the radiation emitting Fuksuhima power plant that was struck by a massive earthquake-driven tsunami on Mar. 11.

“We were forced to move from our house in Okuma-machi barely eight kilometres from the damaged nuclear plant. We wanted to protect our children from radiation, but now we are at the mercy of the government,” he said.

Nine months after the disaster, Sato, a former employee at a car sales company, lives on a 1,500-dollar monthly unemployment dole. His wife is occupied with looking after their three children and cannot take up a job.

Sato’s plight is shared by tens of thousands of people from the tsunami-battered coastline of northeastern Tohoku, that was home to factories producing automobile components and semiconductors for export.

The World Bank estimated the economic cost of Tohoku to be 235 billion dollars, making it the most expensive natural disaster in history.

“The nuclear disaster has added to Japan’s financial woes. The Tohoku disaster, the high Yen, and the global economic crisis spell a bleak forecast for the new year,” Kenji Obayashi, an economist at the Asia Pacific research centre at Waseda University, told IPS.

Japan, the world’s third largest economy after the United States and China, is now facing difficult economic decisions as the country gropes its way to recovery.

Apart from the crippling natural and nuclear disasters, the Japanese economy is reeling from a Yen that has strengthened almost 30 percent against the dollar, hurting export competitiveness. In turn, this has increased unemployment and depressed domestic demand.

To top it all is the scare of a loss of energy supplies for the resource poor country.

Prof. Tsutomu Toichi, advisor to the Institute of Energy Economics, warns in this month’s ‘Nippon’, a leading news magazine, that the non-operation of nuclear power reactors, that hitherto met 30 percent of national energy demands, has created a bleak picture.

“At present local governments are refusing to allow operations (of nuclear power plants) to resume after inspections because of public wariness towards nuclear power. To make up for the shortfall in electricity supply the government will step up generation from existing thermal plants. In such a scenario fuel costs would soar, costing the manufacturing industry 38 percent higher in electricity fees,” he wrote.

Against this depressing backdrop, the Japanese government approved a 1.16 trillion dollar draft budget last week for the fiscal year, starting April 2012. Allocation for disaster reconstruction was set at 150 billion dollars.

Tokyo Electric Power Co., the operator of the Fukushima plant, has asked for 8.8 billion dollars in aid from the state-backed Nuclear Damage Liability Facilitation Fund for compensation payments to those who had voluntarily evacuated. This is additional to the 11.5 billion dollars already granted to TEPCO.

Obayashi explained to IPS that the latest budget will not herald a miraculous transformation but serve as a stopgap measure to deal with the grim reality of an aging population that is increasing social security spending – already at a record high of 270 billion dollars or one-third of the national budget.

National unemployment rates stands at 4.7 percent, with disaster affected prefectures now reporting close to seven percent.

Currently, more than three million people or 20 percent of the working sector earns less than 20,000 dollars annually, on the poverty line.

Named the “working class poor”, the increasing number of people who work at two or even three jobs to get by are a poignant symbol of the breakdown of a once dynamic economy where unemployment was almost negligible.

Developments in Aizuwakamastu, now home to 6,000 nuclear evacuees from Fukushima vicinities, have become a focal point for ongoing discussions on post-disaster recovery.

This city of 150,000 people known for its pristine mountain landscape and hot springs was already struggling with domestic economic recovery when the Tohoku disaster struck, badly affecting tourism and agriculture.

Kumi Inamura, a member of the Aizuwakamastu town management organisation, told IPS that the city is taking tentative steps to boost the local economy through local solutions.

“Aizuwakamastu can no longer depend on injections of public funds from the central government because Tokyo cannot afford to do this,” she explained. Her organisation is now helping local business projects by supporting people who can start new ventures and boost jobs.

Aizuwakamastu is facing a 90 percent drop in the number of tourists this year, affecting local souvenir shops and hotels. “Income from tourism was heavily dependent on school excursions that have fallen drastically after the radiation scare in Fukushima,” Inamura said.

Agricultural produce has been affected and local small and medium companies in the area that supplied the information technology industry face tough competition as large Japanese conglomerates begin to build factories in cheaper parts of Asia.

Ideas being floated include turning Aizu University, the lone higher education institution in the city into a venture business centre and giving students venture capital.

Smaller incubating projects that receive support are businesses owned by women or those that promote local brands.

Obayashi said such developments are modest but represent a crucial transformation to Japanese society and economy. “The stirring in Aizuwakamatsu indicate a growing desire in localities to do things their own way,” said Obayashi.

Such moves, he said, challenge the post-war economic miracle in Japan when links between the bureaucracy and industry created the invincible Japan Inc. “That is crumbling now. We are moving to more diversity and change,” he said.

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