Japan's Double-Edged Sword: What Happens When the Nuclear Power Plants Turn Off?

This post is about economic realities.

On May 6, 2012, in exactly 51 days from today (April 16), all of Japan's nuclear power plants will be shut down. It will be the first time since July 25, 1966 that Japan has not had nuclear power as that was the day the Tokai nuclear power plant began operations. The Japanese government had planned and has approved, but not yet restarted, reactors 3 and 4 at the Oi nuclear power plant in Fukui prefecture.

In spite of the nuclear reactors all going off line in Japan this May, life will go on; the bullet trains will still run, the neon lights will still burn, and the factories and offices will still hum... But it's that last part, the part about the offices and factories still humming, that people have to be concerned with.

Nuclear power has been integral to Japan's post-war energy policy even though it only comprises 30% of Japan's energy needs. When it comes to the reasons why a country that has so many earthquakes embarked on a plan to integrate nuclear power into its needs, people have to remember why Japan made it national policy to never be caught short on energy again in the first place. It doesn't need to be repeated that Japan has no natural resources and energy resources. Japan's mining of coal and other materials is negligible. The final place Japan mined coal as a primary resource was Hashima, the so-called "Ghost Island," that has now been closed for decades. 

The last time Japan didn't have enough energy and food to satisfy her needs she went to war with Britain and America and invaded China and several South-East Asian nations and was greatly responsible for the deaths of several million people. So self-sufficiency in food and energy has been Japan's national strategic policy, with the blessings of the United States as well as all her Asian neighbors and European countries, since the end of World War II. 

We don't want anything like that happening again.

We also don't want Japan's economy faltering and causing even more problems than we have now for the world economy.

TEPCO, the company that owns many of the now offline nuclear power plants in Japan as well as many coal burning plants says that a complete shutdown of all nuclear power plants, which, until March 10, 2011, accounted for 30% of all Japan's energy needs, will have to be offset by a 17% increase in costs passed on to Japan Inc.

Of course, Japan Inc. isn't happy about these increases in costs either. Japan's big manufacturers are losing money now as it is so they cannot absorb such massive increases in costs. If they pass them on to consumers, their sales will go down. If they eat the increases, their "profits" (they don't have any profits now, they are losing billions as it is) will go down even more (I mean they will lose even more money). 

Not only will the prices of everything increase for Japan's people, the number of jobs will decrease as Japan's industry is forced to move factories overseas in order to survive. A loss of industry on Japan will mean a massive increase in unemployment. This is the deadly two-edged sword that Japan cannot tolerate; a massive increase in energy costs that cause a hollowing out of the Japanese economy due to industry leaving its shores, which in turn, cause a massive drop in the number of jobs available. Please refer to Japan's Collapse Will be Absolute and it Cannot Be Stopped - Here's Some Big Reasons Why:

"... It happened in my country. The causes of the hollowing out of the economy were different, but the end result was the same: In the United States, industry left for better shores in the 1980s (they all went to China and India) and we are seeing the results of that today... 

All one needs to do to see what that hollowing out has done to the middle class in America is to get on an airplane and fly to, say, Detroit to see what is left of industry there. It's not rocket science, but where's there's no industry, there are no jobs.

That is the future we are heading for in this country and I see no way out. Zerohedge writes in: A New Beginning in Japan: Glimmers of False Hope:

TEPCO, the bailed out owner of the Fukushima nuclear power plant, is trying to shove rate increases of 17% down the throats of its commercial customers—while rationing power at the same time. Power shortages will spread across most of Japan this summer as the last of 54 nuclear power plants will be taken off line in a few weeks. While pressure is building to restart some of them, public distrust and resistance run high, particularly after revelations seeped out about the nuclear industry’s controlling relationship with its regulators. Japan Inc. at work. The conspiracy had squashed stiffer regulations for nuclear emergencies. Five years later, the people of Fukushima paid the price. For that fiasco, the emails that documented it, its deadly and ongoing impact, and the anger it caused, read... A Revolt, the Quiet Japanese Way.

But it’s a two-edged sword. Shortages of up to 20% this summer are expected to strangle the highly industrialized Osaka area, and companies are shifting production overseas. Now a panel of the Osaka municipal and prefectural governments floated a plan for the city of Osaka to demand that Kansai Electric Power shut down its nuclear power plants permanently. Mayor Toru Hashimoto has come out in support.

Catch that part about a 17% rate increase for commercial customers? Are these people nuts? Japan Inc. is losing money left and right as it it without a massive increase in costs. Please refer to Times of India Sony, Panasonic forecast deeper losses:

Japan's biggest makers of phones, televisions and chips say they'll lose about $17 billion this year, about three-quarters of what Samsung Electronics Co will spend on research to lengthen the lead over its competitors. (emphasis mine)

Sony Corp more than doubled its annual loss forecast for the year ending March 31 as it announced a new chief executive officer, while Panasonic Corp and Sharp Corp predicted the worst losses in their histories. Their combined losses compare with the $22 billion that Samsung, Asia's largest consumer- electronics company, said it will invest in capital expenditures.

These two Japanese giants are going to lose nearly what one Korea competitor will spend on R&D? Folks, it doesn't take a genius to figure out what's going to happen to these entities when they are hit with a 17% increase in costs; two things. One, they will make you pay for those costs and; two, they will move factories overseas where it is cheaper to operate."

Of course, in spite of what the anti-nuclear crowd says and the celebrations that will be held on May 6, 2012 (I might even toast a glass of wine myself), the celebrations will be short-lived. They must be short-lived. Why? It is foolish to even entertain the idea for a moment that Japan, this country with zero resources and no energy, can stay on the non-nuclear course forever. 

To think that Japan can go on from here, into the next fews decades, in an era of declining oil production and rising oil costs and public debt coupled with an aging population problem without a cheap energy source is foolish and completely unrealistic....

In other words, it's not economical. The Center for Global Energy Studies says:

Despite high oil prices, fossil fuels will continue to trump renewable energy sources such as solar and wind power without massive government subsidies, a new investment bank says.

A report by Calgary-based AltaCorp Capital says the “economic realities” of oil and natural gas mean that the world will remain largely dependent on non-renewable energy sources for the foreseeable future.

Japan's government already has the highest debt to GDP levels in the world, it cannot afford to subsidize new industries like solar or wind farms... People will misunderstand what I have written here and say I'm pro-nuclear power. I am not. I am pro-business. I wish we didn't need nuclear power at all. My motivations are purely economical. I wish I could say it were true that Japan didn't need nuclear power to survive but it seems to me, that if I had to put it into a black and white perspective, it's a "damned if you do, damned if you don't" sort of problem for Japan.

Cold, desperate and hungry are great motivators

If Japan's government and her people have to choose between no jobs along with a huge increase in inflation and cost of living or living with the risks associated with nuclear power and possible accidents.... I think they'll take the risks. I think you would too.

Having no energy along with not having any money can do great things to people's minds. Starving seems to be a great motivator for people... 

We've already seen how well it motivated Japan in 1931 ~ 1945. 


Thanks to my friend Kamasami Kong who hosts the Tokyo Met-Pod. You can listen to the Met-Pod and hear interviews and what's going on in Tokyo here. (http://metropolis.co.jp/podcast/)