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 AOYAMA VIEW

Five Years from Japan "3-11" - Making Best Out of Gigantic Recovery Task
For Finnish expats here, the big event this week was President Sauli Niinistö's visit here, the first official one from Finland's leader in 10 years. It's great to have Finland put on Japan's political map again by our top man. From what I've heard so far, meeting with PM Abe, various ministries and the scions of Keidanren and Nagatacho went all well. Finland's views and ideas were well-received. FCCJ also helped in arranging dinner for the Business Delegation members together with some Japanese company representatives at the honorable Kojunsha Club in Ginza.

For Japan nation and for many of us foreigners, who experienced it in 2011, the main news this week, however, has been the 5th anniversary for the painful memory of the "3-11" triple catastrophe that killed 18,000 people and devastated numerous coastal communities in north eastern Tohoku area. Many of those towns and villages, have not yet been fully rebuilt and their economies recovered, something that reflects both the vastness of devastation and the inefficiency of Japan's petty bureaucracy. Readers might recall that it took the first two years just to remove the 25 million tons of debris as well as to decide whether the towns would be rebuilt at their original seaside locations or removed to safer ground higher up. In case of latter decision, further time was then needed to find suitable land in the mountain sides and build the necessary infrastructure, roads, water pipes and power lines there. Opting for the original location, new, higher seawalls for better protection were needed in addition to fixing the infrastructure, homes, schools, hospitals and work places.

It is said over 400 km of new seawalls have been built across Tohoku together with hundreds of new roads, rail links, bridges and tunnels. The government set JPY 25 trillion (over USD 200 billion) to cover the costs for the five years to this date, but the centralized management of each project based on government cost standards not accomodating rapid escalation of material prices, wage rises and lack of workers has led to countless cancellations and delays. Each year some 20-30% of allocated funds ended up unused. Unable to move to out, almost 60,000 people, many of them aged over 65, still live in temporary, prefabricated houses that were meant to last only 2-3 years. The new public apartments supposed to take them all are just 30-40% finished today. Yet, in some places much has been achieved and the life has returned back to somewhat normal.

My own experience is from Onagawa, a small town at end of a beautiful fjord behind Ishinomaki City, which was 90% wiped by the tsunami. My old company helped with its composite wood materials to build temporary homes there that the renowned architect Shigeru Ban designed from shipping containers and other recycled materials. They were said to be the best liked by the residents in the whole prefecture. Two years ago, the town was still a gigantic empty, dusty construction site, but now it has a complete new center shaping up with a scenic bay side street and shopping center with seafood restaurants and coffee shop offering Italian espresso. The local rail link running by seaside to Ishinomaki was re-opened last year together with a Shigeru Ban designed station and new tourist-related businesses are cropping up - like a dive shop that has customers all the way from Sweden.

Across Miyagi and Iwate prefectures business is said to be 75-80% back and about as much of the agricultural land has been cleaned up from salt for renewed crops. Where things are not well back is Fukushima prefecture, especially the areas round the crippled nuclear plant, where decontamination work from nuclear fall-out took much longer and business is only 55% back. More than USD 15 billion public money was used for the work and millions of tons of radioactive soil, plants and debris was removed - only to lie today across the prefecture neatly packed in plastic bags in short term "provisional" storage areas ("kari-kari okiba") or medium term "temporary" storage areas ("kari-okiba") as no permanent location has been found for them anywhere. It's an old NIMBY ("not in my back yard") situation with everybody dodging the responsibility and government officials playing for time. Except that the play time is limited to 2-3 years when the plastic bags start to decay. Decisions are badly needed here again.

Yet, most of the prefectural area is now safe for living again and even the towns near the crippled plant are expected to be opened for return by next year. All farm product from veggies to 10 million tons of rice that the prefecture traditionally produces has been tested free of any contamination, yet prove difficult to sell as the media, especially the foreign, keeps playing on old negative themes: radiation, evacuation, anxious children and the nuclear industry. Even at the Dai-Ichi plant, where 7000 workers continue the clean-up work, the conditions are finally better with on-site housing, warm meals and only light protective suits needed except inside the reactor buildings. Following requests from the staff, the first convenience store opened there last week as Lawson deemed the place safe enough for its own staff.

Still, it's another gigantic task with hardly 90% of the work done and all kind of problems slowing down the progress. The biggest has been the contaminated water that keeps leaking still at 150 tons per day (down from 400 ton/day) and is being pumped up into "temporary" storage tanks now numbering over 1000 and holding up over 700,000 tons of it. The hi-tech "ice wall" that TEPCO officials promised will stop the leaks in 2012, is now said to be still four years from completion and the company is now focusing efforts to speed up to clean all that decontaminated water for eventual release well diluted into the ocean. Unfortunately, the filtering system, where Finland's Fortum also contributed with knowhow, cannot remove tritium, the worst poison, and this keeps local fishermen apprehensive against any release into sea. On the plus side, TEPCO's work on the actual reactors has received positive comments from the international experts: the removal of over 1500 potentially dangerous fuel rods from building No.4 was successfully completed some time ago and the work is now proceeding for removal of other before proceeding inside the reactors themselves. For that robots that don't exist yet have to be developed. All this is expected to take decades and nobody can put the finger exactly what the final cost will be.

Beyond all the progress and huge money spent, Tohoku is facing the same ugly demographic truth as the entire country: how many people will actually live there/here in 20-30 years' time? It's not only that many of the evacuees, that moved elsewhere, have settled into their new places and will never move back, but even the remaining population keeps moving out, especially young people, because they can't see their future there. Onagawa can serve again as example: in 1964 its population was 18,000, just before tsunami it was 10,000 and today it is 6,800. More than 1/3 of them are pensioners over 65 year old. What is the point of restarting fisheries and plywood factories or opening up new shopping centers if there are not enough workers and customers?

The situation is not any different in other parts of Japan country side: the national census 2015 showed the population loss past 5 years was even bigger in Akita without any tsunami damage than in the badly damaged Iwate. The natural solution to the population problem is clearly immigration - there were thousands of Chinese workers in the Miyagi fisheries already in 2011 - but Japan's official line remains to be closed for foreigners. Abe's current minister line up has even a position for one who should plan how the nation could manage with just 100 million people instead of today's 127 million.

Behind all memorial speeches and solemn promises to continue the work in Tohoku, the political process is proceeding in normal, slow schedule. The ordinary budget for FY2016 passed Lower House on February 29 so it will be clear through Upper House by the start of the new fiscal year April 1 thanks to the 30 day rule whatever delay tactics the opposition might come up with. Next, the government will focus on pushing through 11 new economic laws that are needed for ratification of the Trans-Pacific trade deal signed last month. Deliberations on the bills are scheduled to start soon in a special panel to be established in the Lower House. If all goes well, Japan could be among the first countries to ratify the deal even if it was the last one to join the talks. With TPP talks in USA pushed forward to next year after presidential election and all leading candidates talking publicly against it, Japan is putting its faith in strategy that if Japan and other 10 countries have ratified TPP by then, it would be too embarrassing for USA itself to pull the plug on its own trade initiative. Wonder if that will hold back president Trump, but maybe it could work with president Clinton.

Tokyo has calculated that the TPP deal will boost Japan GDP by JPY 13 trillion or 2,6% against loss of JPY 100-200 billion in agriculture, forestry and fisheries sectors. For latter, the local governments are now preparing their bills for compensation to their farmers and fishermen. They seem long and detailed: for instance Gifu says it needs JPY 400-800 million to cover decline in beef sector, JPY 200-400 million for pork, JPY 100 million for poultry and JPY 100-200 million for eggs. In Shikoku's Kagawa, the famous "mikan" mandarin oranges could decline by JPY 50 million, yet squids and sardines could be OK according to prefectural calculations. The biggest bill is expected to come from Hokkaido where agriculture, forestry and fishing are the three biggest industries.

Personally think most of the concerns are exaggerated as many of the local food products are already highly priced yet popular for their high quality and TPP's schedule to lower tariffs is limited and slow. Especially, all talk of "cheap rice" entering Japan has next to no basis in changes to tariff free allocations. The way I see it, it's Prime Minister's promises for big compensations and even a special new agency with USD 5 billion budget to handle them that are creating these competitive bids from each corner of the country to get their share of his extravagance. Also think Prime Minister's initiative to raise them is based on pure vote catching in this summer's Upper House election.

Ratification of trade deals are always dependent of changing moods in each country;s domestic politics and hence it is no wonder that Abe government has let it be known to EU that it would like to keep the Japan-EU deal on back boiler until TPP is through and the summer elections have been held as the chief negotiator Timo Hammaren told us at FCCJ luncheon meeting last month. According news, this has created some indigestion in Brussels, where some officials have proposed to show EU's disappointment by demoting the annual "summit meeting" scheduled for Golden Week into "informal talks" with Abe. In my view, this is unnecessary haughtiness and only would serve to create bad feeling among the negotiators. The EU-Japan FTA deal is potentially bigger and deeper penetrating than TPP and should not be risked by petty politics. In fact, should TPP end up scuttled by its own initiator USA, the deal with EU would become crucially important for Abe government's credibility.

Things are looking increasingly up-hill for Abe already. The final figures for 4Q.GDP'15 GDP showed decline at 1,1% annual speed and news from the ongoing quarter do not promise any improvement, so when Jan-March figures are published, Japan could be in techical "recession" again. The consumer demand looks unlikely to jump up and January exports showed already 15% decline, something that could only get worse with slowdown in China continuing. The only positive economic news recently has been that the January current account balance grew to JPY 520 billion - five-fold from one year ago - DESPITE the JPY 410 billion deficit in goods trade. This is a big contrast from China where the capital is escaping the country at increasing speed despite growing exports. In fact, JPY has been the strongest big currency so far this year and Nikkei the biggest riser among global stocks in past 30 days, signs of strength normally but guess both moves only show how bad things are elsewhere.

No doubt, Abe is now desperately looking for anything to raise up the economic outlook as things are not going his way in other areas either. The worst set back took place this week in nuclear restarts when another judge again accepted activists' petition to turn off Takahama nuclear plant that just had started following another judge overturning a third judge's earlier decision for same. In other words, it seems the debate about the new safety rules, allegedly "tightest in the world", has been taken over from the safety officials to local court judges who respond to private legal challenges. In this last case, the request came from just 29 plaintiffs in neighboring prefecture, who claimed that an accident in Fukui prefecture could contaminate the big Biwa Lake in their Shiga prefecture. To change this into Finnish conditions, it would be like somebody in Tampere claiming Olkiluoto plant should be closed as STUK safety rules are not sufficient protection for Nasijarvi Lake. We will now see if the power company or the safety agency will counter-sue again the Shiga verdict. Anyway, it's sad that the Japanese society is changing from order and harmony into one of libel suits like the USA has gone.

Another sad case of such development has been the confrontation between the central government and the local government in Okinawa, where both sides "triple sued' each other over relocation of a US air base close to capital Naha. Realizing he is losing prestige and popularity in forcing the issue, Abe relented this week to make "truce" with the local governor and hold back the building work for a replacement air strip while both parties cancelled their multiple law suits to focus just on one.

To top off all the government misery, there's the latest muck-up in the tragi-comic story of new Olympic stadium construction mistakes when it was found out that the newly selected plan for a revolutionary wooden stadium did not fit with the official fire safety rules to allow the Olympic fire there. For some ancient reason, Japanese building rules say that you cannot have a fire place in a wooden building, yet "somehow" most of the homes in the country side do have one. In fact, my mountain cottage has one and I am sure even Prime Minister himself has one in his Finnish log house close to Mt.Fuji.

Kengo Kuma, another world renowned Japanese architect behind the plan, has told that there was no request for one in his task, even if we all know that the Olympic rules request for one and the old historical cauldrons from the old stadium where preserved to be put back into the new one. Yet, he thinks that the rules can be bended somehow for this special case. My proposal is that if no way can be found otherwise, Abe-san can recall FCCJ ex-president Marko Saarelainen back from Finland to find the solution, as he found one for Prime Minister's own house.

Timo Varhama  
Tokyo, 11 March, 2016   


Previous Columns

28 February 2016
"A Dig Deeper into Politics: Ignorance, Camouflage, Chicanery "

15 February 2016
"Markets in turmoil, economy in decline, challenges grow for Abe"

5 February 2016
"Minister scandal distract, economy slow down, Kuroda rides for rescue "

28 January 2016
ABE: THE REALITY BEHIND ALL THAT TALK "

20 January 2016
"Bear Outlook for Monkey Year Grows, Taiwan Votes to Keep Distance from China, but Pop Group is More Important for Many "

12 January 2016
"NEW YEAR VIEWS - AND A LOOK BACK AT 2015"

17 December 2015
"Global Environment, Food Tax, National Stadium: Historical Decisions or Political Parading? "

8 December 2015
"Challenges in Paris Conference, Challenges Back Home in Japan "

27 November 2015
"Refugees, bombs, business and global warming - can we control them all? "

3 November 2015
"Japan, USA, UK or Germany - China Impacts Us All Today "

22 October 2015
"New Ministers, New Trade Deals, All Political Play"

7 October 2015
"Power games, ball games, trade deals and refugee misery"

25 September 2015
"Big Problems, Big Talk and Big Figures - Each in Their Own Way".

9 September 2015
"Challenges in Japan, Tougher in USA and Europe ".

1 September 2015
"Looking at Neighbors, Japan Seems Stable and Safe ".

19 August 2015
"End Summer, Ceremonies and Holidays Over, Back to Work for All".

6 August 2015
"Hot Weather, Hot Air in Politics - From War Anniversary to Whisky in Space".

23 July 2015
Greece, China, EU, Japan: looking for the lost reality

23 June 2015
World No.1 City? The Difficulty of Passing New Laws, the Easiness of Spending a Lot

16 June 2015
"Only in Japan?" - Somethings, Yes, But Others Are Same All Over

4 June 2015
Security and Finances: Pensions, Companies, Banks, Olympics, FIFA

21 May 2015
Economy Back on Track, Record Profits at Big Companies

11 May 2015
Spring Events: Odaiba Rock, Shibuya Sex, Capitol Hill, White Hall and Red Square

22 April 2015
Elections, Elections - Finland, Japan, Around the World

30 March 2015
Sakura: beautiful, but just for a short, fleeting moment

16 March 2015
Better late than never - Japan moves slowly

2 March 2015
Three struck out, three more in doubt - Abe's ministers under attack again

19 February 2015
Spring, Sibelius, Chocolate, Budget and Big, Bad Putin

5 February 2015
Reform Work Starts - Energy, Farming and Food on Wish List

26 January 2015
Terror strikes, plenty work, sad memories wait

15 January 2015
Watching AKB, Eating Mochi, Spending JPY 96 Trillion - Japan Off to Better 2015 After So-So 2014



About the Columnist

The columnist is a Japan veteran among Finnish business, our Chamber ex-president and today Member of the Board of Trustees.
After running a major Finnish industry company's Japan business for over 20 years, he is now Senior Associate in a strategic consulting company.

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