Japan's Long Haul

The scope of the recovery Japan needs is just starting to emerge, over a month after the earthquake and tsunami. Now, the operator of the Fukushima nuclear plant is saying they'll need six to nine months to do a cold shutdown. Meanwhile, the government in Tokyo has formal declared a 12-mile-radius "no-go" zone around the plant, thereby formally locking out thousands of families from the homes they fled back in March. Frustration among the populace is rising, not surprisingly, and dissatisfaction with the government's response remains high.

But Japan faces some other looming problems. First, of course, is the massive reconstruction that will have to take place along the northeast coast. There's no clear government plan yet for ordering priorities, and how the government will pay for it all is equally unclear. At first, Prime Minister Kan said no new debt would be issued; now he's suggesting the government may float some bonds to pay for the rebuilding tab.

Second, the spill-over effect from the ongoing electricity shortage will cause major discomfort in Japan's hot, humid summer. Schools and working hours may be curtailed, and major manufacturers will continue to suffer from lower production. Toyota just said that it will likely not return to pre-quake production levels until the end of the year. This may start driving up consumer prices around the globe for Japanese products or those that use major Japanese components. Just as bad, tourism to Japan has been decimated--4 million foreigners visited last year--and both urban and rural areas that depend on tourism will be hard hit. Huge numbers of Chinese and Korean visitors are staying home, and once they find new places to go, there's no assurance they'll return to Japan.

Third, it will take years for Japanese agricultural exporters to recover from the bans on their products that many Asian nations, including China and South Korea, have instituted. Japanese fish, tomatoes, rice, and other products were just beginning to find a foothold in Asian economies; now they are effectively locked out while concerns about irradiation continue. Even if such products are considered safe to eat, public aversion to Japanese goods may linger for a long time.

In short, though news from Japan is slowly fading from the headlines, the woes of the world's third-largest economy are going to continue for years. Japan remains a vibrant society, but the cumulative effect of all these problems is likely to drag down national confidence in the coming months. Prime Minister Kan and his top lieutenants will need to be even more innovative and competent in order to instill confidence in their countrymen. Otherwise, Japan may enter a slump that will tax even the most energetic of societies.

Michael Auslin is a resident scholar at AEI.

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