Economist Nariai Osamu looks at the four issues Japan urgently needs to address as it moves toward recovery: providing support for disaster victims, establishing a plan for reconstruction, calming international fears over the nuclear crisis in Fukushima, and addressing the shortfall in the power supply.
A month has passed since the Great East Japan Earthquake. The human cost of the disaster has far outstripped initial expectations, with more than 30,000 people dead or missing. The widespread destruction of infrastructure and production facilities has deprived many more of the very foundations of their social and economic lives. Four major issues need to be addressed as a matter of urgency. These are (1) providing prompt support for the daily lives of people affected by the disaster, (2) establishing a long-term plan for reconstruction, (3) dealing with the international “Fukushima shock,” and (4) addressing the shortfall in the electric power supply.
Prompt Distribution of Aid
Many thousands of people lost their livelihoods in the March 11 earthquake and tsunami. Providing immediate support to these people is an urgent priority. People whose productive activities have been affected by the radiation scare also need immediate assistance. There have been delays in putting up temporary housing. This is because cuts in public investment have caused demand for prefab housing to decline, reducing Japan’s ability to meet this need domestically. Imports need to be stepped up as a matter of priority. The employment problem is even more serious. Ships and boats represent the physical capital of the fishing industry, and the wreckage caused by the earthquake and tsunami has deprived thousands of fishermen of their income. The government also needs to provide livelihood support to vegetable and dairy farmers who have been ordered not to release their produce to market because of radiation fears. For all these reasons, the charitable donations coming in from Japan and overseas need to be made available to disaster victims without delay.
An Organ with Overall Responsibility
As Japan moves toward reconstruction, we need to bring together knowledge and ideas from all over Japan to form a new set of principles for the nation’s disaster alleviation strategy. We cannot afford to allow the rival ministries in a vertically compartmentalized government to use reconstruction as an excuse for splashing out on a series of white elephants, as has happened too often in the past. To ensure a vision for reconstruction based on a clear assessment of the outlook for the next decade, we need to create a new organ with overall responsibility for reconstruction and staff it with people capable of shouldering the responsibility for getting the work done.
Calming International Fears on Fukushima
Global opinion has been quick to respond to fears of radiation leaks from the crippled nuclear power station in Fukushima. Japanese agriculture, whose exceptional safety levels were a major selling point until recently, has been hit by export restrictions, and the tourism sector faces a dramatic fall in the number of foreign visitors to Japan. There has also been criticism of Tokyo Electric Power Company (TEPCO) and the government for the decisions they have made and the way they have released information to the public. Unless Japan mobilizes all of the experience and skills it can find, both at home and overseas, it risks a total collapse in international credibility. The economic losses that would ensue from this are beyond calculation.
Using the Price Mechanism to Alleviate the Power Shortage
Reducing the power supply by 20%–30% in response to an expected surge in demand during the summer will only encourage firms to relocate their production bases. Widespread public readiness to conserve electricity will not be sufficient on its own to overcome this crisis. We need to consider innovative ways to make use of the price mechanism. By making electricity more expensive during the day and cheaper late at night, it should be possible to reduce demand at peak times. Forcing people to exercise restraint only saps the vitality of the Japanese economy as a whole. The time has come to make full use of all the experience and wisdom at our disposal. (Written on April 5, 2011.)
In This Series
An Economist’s View of the Disaster
A Fatal Lack of Urgency (July 26)
Japan’s Government of Fools: Enough is Enough (May 29)
Have the Current Generation Foot the Reconstruction Bill (May 8)
Japan Needs to Be on a “Wartime” Footing (April 22)
Four Priorities for Reconstruction (April 5)
Grasping the Nettle on Public Finance (March 23)
Graduated from the University of Tokyo, where he majored in economics. Served in various posts at the former Economic Planning Agency and as a senior economist at the Institute for International Policy Studies. Is now a professor at Reitaku University. Also active as an independent economist. His works include Exploring the Japanese Economy.