It is also a time of searching for scapegoats, as the hapless officials and workers at Tokyo Electric Power Company (TEPCO) battle like latter-day samurai warriors to get control of a disaster that their predecessors (and the geo-scientific advice on which they and insurers drew about the probability of these events in this region) failed hopelessly to predict.
Recovery and the massive clean-up will itself take a year or two, not to mention managing the fallout from the Fukushima nuclear power crisis. This is an immense national task for Japan. The supposedly selfish younger generation has demonstrated particular selflessness, pitching in to help the afflicted and volunteer in the heartbreaking effort to clean up the mess. Happily the recovery is being assisted by the international community on a scale unprecedented in Japanese history, with teams coming from the United States, Europe, China, Australia and other countries. And ordinary communities in Australia and all over the world have volunteered funding and held poignant services to commemorate their universal human loss.
Reconstruction requires focus on the future, a future that is difficult even to begin to ponder at this stage. There is natural paralysis in thinking beyond the present calamity. The immediate effect of the triple disaster is to put thinking about Japan’s reform and international agenda on the back burner. When farmers in the heartland of one of Japan’s main granaries are on their knees, how is it possible to contemplate prosecuting agricultural reform through commitment to comprehensive trade liberalisation within the proposed Trans-Pacific Partnership? It was a long shot anyway, but now it seems even more remote.
Yet focus on the future is exactly what is needed now, both inside Japan and out. It is the therapeutic and practical thing that needs to be done.
How should Japanese leaders and the Japanese people — and how should we — begin to think about Japan’s future now?
Japan must deal with a disaster, the longer-term consequences of which have to be managed from now. And in the overall scheme of things it is problem that can be managed, though it may be managed more or less well.
One issue is how to pay for rebuilding the assets destroyed by the earthquake, the tsunami and the nuclear accident. The estimates of these costs have been steadily growing — the highest estimate I’ve seen put them at US$600 billion; the official estimate is US$309 billion, around 6 per cent of GDP, including guesses at dealing with radiation damage; and more cautious figures put the costs at under US$200 billion including costing the loss of human capital embodied in around 30,000 souls who have lost their lives.
Even the upper estimate of capital loss represents perhaps only 1 to 2 per cent of Japan’s physical capital assets. At the end of World War II, a disaster with which the current one has been compared, Japan was left with merely one third of its (much lower) physical capital assets, not to mention the millions who’d lost their lives.
This week Nobu Yamashita and Sisira Jayasuriya review the debate that gathered pace in Tokyo last week on how to pay for recovery. They identify four options for financing reconstruction: diverting spending from current programs; introducing new taxes to raise revenues; borrowing from the public; and ‘monetizing the debt’ by direct purchase of government bonds by the Bank of Japan. They conclude that ‘Japanese bond yields have in fact continued to fall even after the disastrous events of March 2011 and that there are no signs of any inflationary pressures. In the current circumstances, after two decades of battling deflation and a stagnant economy, more reliance on monetizing the debt is likely to maximise the stimulus effects of reconstruction while alleviating the pressures on currency appreciation. Some inflation may be a welcome thing in Japan and economic growth will itself tend to lower government debt’.
Another issue is how to think about the strategic international dimensions of securing Japan’s future. No country, perhaps, has greater interest in this, or more obligation to work the issue through jointly with Japan than Australia, with its critical role in underpinning the international dimension of Japan’s food, resource and energy security. Australia supplies over half of all Japan’s strategic raw material needs and, even though it’s not a supplier of oil, a quarter of Japan’s energy requirements — more than Saudi Arabia or any other oil producing state.
Good fortune, which has been in short supply in recent times, has Australian Prime Minister, Julia Gillard, visiting Tokyo in just a few weeks. As Jenny Corbett notes this week, she will be the second foreign leader of a major state (after President Sarkozy of France) to visit Japan since 11 March. This will be a time for expressing the solidarity of the Australian people and the international community with Japan. It will be a time for reviewing progress with recovery. Australia was among the first with commitments to the recovery effort on the ground. Ms Gillard will need to visit Sendai, however tight her schedule. But more than all of that her visit to Japan will be a time for her to set out a long-term vision of the comprehensive security partnership that Australia and our region will want to strengthen further with Japan beyond the immediate crisis.
The disaster in Tohoku has knocked out a sizeable slice of Japan’s food supply chain for some time, if not forever. This is a time for quietly explaining the huge advantage of reliable international (institutionally guaranteed) food security. That needs to be — and can be — articulated with effect. It is a time to explain quietly that the idea of a high food self-sufficiency ratio for Japan is not necessary or productive. A new Economic Agreement between Australia and Japan will contribute to providing the institutional guarantees. International markets cushion Japan against the shortages and escalating prices of food and other essential materials that otherwise would put added burdens upon the Japanese people. Nothing will be quite the same in the Sendai region, or in Japan, again. Infrastructure won’t be rebuilt in the same way without private funding as Corbett says. Australia is already working with Japan on new models of infrastructure financing, for their own countries and across the region. The pace of that work together must now accelerate.
Ms Gillard’s visit will be a time to lay out, with feeling and sensitivity to the lonely position in which Japan now confronts its vulnerabilities, a forward-looking vision of the reliability of Japan’s partnership with Australia and with the Asia Pacific region — a vision that draws on the assets in the bilateral relationship and regional associations that have been put in place together over years.