Oi! Oi! Nuclear is Back!

Prior to the accident at Fukushima, Japan relied on nuclear power for around 30% of its generation capacity (with plans to raise that to 50% by 2030), and had a total of 54 active reactors dotted around the country’s coast. For the last few months none have been operational because of ongoing public concern over their safety.

With the summer season now upon us however, demand for electricity for air conditioning will skyrocket leaving the Kansai area in particular with a significant shortfall unless some of the nuclear reactors are restarted. The most likely candidate was the plant at Oi, in Fukui Prefecture, part of Japan’s “Nuclear Alley”. This is a place close to my heart, because when I was last living in Japan it was close to my home!

For weeks we have witnessed a pantomime with the nuclear regulator, plant operator, prefectural governments and the Prime Minister all playing roles. This pantomime slowly conveyed to a largely sceptical public a carefully crafted message: this is safe, and this is inevitable. When the Prime Minister finally announced the restart he framed his argument around the importance of affordable electricity for maintaining the Japanese standard of living.

The Oi reactor was restarted this week and is expected to start to transmit electricity from today.

I have just a few thoughts to share:

Firstly, I think it’s incredible that Japan has to-date survived the loss of 30% of its generation capacity without rolling blackouts. This has been achieved through restarting mothballed thermal plants and encouraging people and businesses to save energy.

Secondly, I note with interest that there is no sunset date for the restarted operation of Oi, something which would seem sensible given that the extra demand will only last until the summer ends and that reaching public consensus over the future of nuclear power in Japan is still far off.

Thirdly, I think geothermal electricity generation could in future play a much larger part in Japan’s energy mix. For this source of electricity Japan’s unstable geology becomes a strength rather than a weakness.

Finally, it is worth noting that the Tokyo area still have no nuclear plants in operation. Several years ago TEPCO boasted in a TV commercial that 40% of its power came from nuclear plants in Niigata and Fukushima. I didn’t want them looking silly (again), so I took the liberty of updating their ad.

before
Before (view commercial)
After

Peak Japan

Japan’s rapid development following its humiliating defeat in the Pacific War has been well documented. During the boom years of the 1970s and 1980s the country’s infrastructure developed at an unprecedented rate and to a very full extent. Highways and bridges were built servicing areas with no need for them. Airports were constructed in remote, lightly-populated areas to fly vegetables to the cities. (Have you ever bought a radish that has its own Air Miles?) Unused concert halls and empty art galleries were built in the smallest of hamlets. Railways were expanded to every corner of the country and sprawling subways (underground railways) were built under most of the major urban centres. While current residents enjoy the fruits of this investment, they are increasingly having to shoulder the burden of maintaining it all.

On NHK news last night there was a story about the increasing cost of maintaining Japan’s now ageing public infrastructure such as roads, highways, bridges, and municipal public buildings. Maintenance costs for public infrastructure have been increasing year on year for the last half-century, and last year, for the first time, more money was spent maintaining current infrastructure than building new stuff. In the last couple of decades Japan has been stuck in a cycle of deflation, so these increases in costs are real, not inflationary.

This would all probably be OK if the economy was growing (it’s barely moving), the population was increasing (it’s declining), the number of taxpaying workers was going up (it’s not),  there was little public debt (it’s now at a whopping 220% of GDP), and there were no other budgetary surprises (it is now forecast that decommissioning and decontaminating Fukushima will take 40 years). Living in Japan in 2012 really feels like living in a post-developed economy that is just starting to go into gradual but terminal decline.

So what’s the solution? On the news story last night NHK looked at how the municipality of Hamamatsu was dealing with the problem. Their solution is a public fire sale. Assets that can be sold will be sold, and the small amount of money raised will be used to demolish assets that have no value. The national government is currently pursuing legislation to increase sales tax. Further tax increases along with cuts to social services and the national pension scheme are inevitable.

Unless some other radical step is taken (such as opening the country to mass immigration) I think that residents of Japan in 2030 will look back to 2012 as the end of a golden era for Japanese public services, taxes, and infrastructure.

Electricity Prices a Surprise

Given how often I hear Japanese lamenting the cost of electricity in this country, I was surprised to discover yesterday that the cost of residential electricity in this part of Japan is pretty much the same as it is in South Australia (around 25 cents per kWh). I expected Australian rates to be cheaper in comparison given the following:

  • In Chubu electricity is provided by a regional private monopoly; in SA there is (supposedly) competitive markets for power generation and retailing.
  • Japan has almost no natural energy resources. Australia has an abundance, and exports Liquified Natural Gas and coal to Japan.
  • The only nuclear plant that supplies this region has indefinitely suspended operations following the March 11 Tsunami because it was built in a costal location that is right on top of a fault line.(Yes, I know! What were they thinking?) This means that almost all of Chubu’s electricity is now being generated at resource-intensive thermal power plants.

Why isn’t electricity in SA cheaper? Does the “Tyranny of distance” strike again? (i.e. Is the cost of distributing the stuff much more expensive given SA’s widely disbursed population? ) And how much further will it rise once the carbon tax is implemented? Could we end up paying more for energy in resource-rich SA than they (and currently we) pay in resource-poor Japan?

Hamaoka Nuclear Power Plant
Hamaoka Nuclear Power Plant - All reactors are currently suspended. Photo source: Wikipedia

Down, Down, Dollar is Down

(If that title seems weird, try singing it to the Coles supermarket tune.)

This is what the Aussie has been doing with itself for the last 3 months. Looks like it has been officially rejected from the glamour club of world currencies.

Dollar vs JPY
AUD vs JPY over last 3 months

A couple of weeks ago I attended the meeting of the Nagoya International PC Club, and no-one had anything good to say about the rise of the Yen. A Japanese attendee who makes a living selling kimonos on e-bay said he could not raise his prices or this American and European customers would stop buying. A Polish developer lamented the fact that he was being paid in British Pounds, a currency which has fallen 50% against the Yen in since 2007. The American attendees were kinda annoyed too, given that their USD holdings have also declined significantly compared to the Yen.

What none of us could work out is why is the Yen so strong? Interest on savings in Yen is abysmal. The best we could come up with was that Japanese believe it is patriotic to hold government bonds and keep their significant savings in Yen in a local bank. Or perhaps that the sudden recent increase in the Yen was due to people getting out of the carry trade because they’re worried that their investment currency will tank.

Share your wisdom in the comments!

Ageing (car) Population

Daihatsu Car Model
Japan – A country where you can express yourself in surprising ways by your choice of car.

I am married to Nicewife, a Japanese national.

Nicewife’s dad has some special friends that he has know from his schooldays that have become legendary characters to me. Let me introduce them. There’s “special car friend” (he owns a car dealership and garage), “special-tomato-friend” (he owns a hydroponic tomato farm), “fisherman-friend” (quite dissimilar from his strong minty-tasting namesake), and “always-wearing-purple friend”. I love the fact that they are named with reference to what benefits their friendship provides – apart from “always-wearing-purple friend” that is, who presumably counters his apparent uselessness with a good social presence.

Late last week we met “special car friend” to take possession of a car that we will be able to use during our gap year in Japan. If there is anywhere in Japan where the car is king, it’s Aichi. The lifeblood of this prefecture is the automotive industry. The largest car manufacturer in the world, the Toyota Motor Corporation, is headquartered here. When I was first living in Japan (about 8 years ago), people were generally driving nice, modern cars that were only a couple of years old, but were yet complaining that they could not afford to replace them because, “the economy is bad”. As an Australian, and being from the State with the oldest car fleet in the country (if we exclude Tasmania – which is a good thing to do generally anyway), I found this pretty amusing.

I was curious about just how things have changed since 2003. In the intervening period the Japanese economy has continued to stagnate. The national public debt has ballooned to about 200% of GDP. The population has peaked and is several years into its forecast near-terminal decline (more people are dying or emigrating than the combined total of those being born and immigrating). The government, with its funds depleted, are facing an expensive cleanup operation in northern Tohoku following the March 2011 Tsunami, which includes yet unknown costs related to the nuclear disaster at Fukushima.

I asked “special car friend” how business was going. He sat back in this chair, sucked the air through his teeth, and then gave the following frank assessment.

“The problem with cars nowadays… they don’t break down”, he explained.

“That’s terrible!” I sympathised.

“What about car servicing? Surely that’s a cash co…. um, I mean, surely that’s a vitally necessary public service you can provide?”

“Retirees, housewives, workers who commute by public transport. They’re only driving short distances… 1,000 to 2,000 km per year, so they don’t bother getting their cars serviced very often.”

“I see. What about new car sales?” I inquired.

“Well, you know, the economy isn’t good. People used to change cars every 3 years or so, now they’re holding onto the same car for 5 or even 10 years! And when they do upgrade, they buy privately off the internet.”

These things are all relative, however. Special Car Friend pointed to a white Toyota Crown parked out the front of his office. It was a trade in, about 10 years old with 100,000 km on the clock. Equivalent Camrys in Australia are for sale on carpoint.com.au for around $8,000. How much for this white Toyota Crown? Less than nothing! Contrarily, special-car-friend will have to pay for its disposal.