TT-607 -- Economic Fall-out from Fukushima, e-biz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, March 27, 2011, Issue No. 607

+++ INDEX

- What's New -- Economic Fall-out from Fukushima
- News -- Will Japan get Summer Time?
- Candidate Roundup/Vacancies
- Upcoming Events
- Corrections/Feedback
- News Credits

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+++ WHAT'S NEW

Two weeks after the Tohoku-Kanto earthquake, life in Tokyo
has entered a stage of uneasy calm. We all know that just
250km to the north, the Fukushima power plant is still
spewing radiation locally, and in the last day or so
officials have had to admit that the containment vessel in
the Number 2 reactor is probably leaking radioactive
material into the plant and eventually the ocean. When it
rains as it did last week, or when the wind blows from the
North, as it did today, the number of people going outside
noticeably drops. Everyone is conscious of the risks.

The fact is that the radiation levels are still low in
Tokyo, but it doesn't help that the city's water supply was
contaminated some days ago, then improved, then suddenly
came up dangerous again in outlying areas of Chiba and
Ibaraki. Just how uneasy Tokyo's 35m people feel can be
gauged by the ongoing shortages in the supermarkets. Even
though supplies were supposed to have re-started this last
week, most stores are completely sold out of water, toilet
paper, dairy products, and regular types of bread. Well, at
least gasoline is available again.

For reliable radiation readings on a daily basis out in
Chiba, go here:

http://www.jcac.or.jp/lib/senryo_lib/senryo_009.pdf

In our part of town, in the shopping triangle represented
by Shinjuku to Shibuya and then through to Roppongi/Akasaka
there is still a lot less people shopping and eating out
than there usually are. Again, the average person is in a
state of nervous agitation and the last thing they are
thinking of is relaxing with friends at a restaurant or
buying new clothes. This state will eventually subside, but
not until the nightly TV coverage of an almost
out-of-control nuclear reactor ends.

In Minato-ku, the heartland of foreign expats living in
Tokyo, the streets are bare of foreign families.
Conveniently it has been school break and many have left to
spend time elsewhere. But it's not just the foreigners
leaving, we are hearing many stories of Japanese family men
sending their wife and kids elsewhere as well, while they
continue working in Tokyo.

This is all creating a feeling of foreboding by those of us
in business, that tough times are ahead. Wanting to get a
feel at ground level, over the last few days we've been
visiting local restaurants and what we're hearing is that
patronage is down 30% to 50%, with those establishments
serving foreigners seeing almost no customers at all. It's
a dire situation and unfortunate given that 2011 started
out so promisingly.

So just how bad will the financial situation will become?

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[...Article continues]

The Japanese government said late this week that they
expect to see a maximum of JPY25trn (US$300bn approx.) in
damage caused by the earthquake and resulting tsunami.
Offsetting this impact would be about JPY25trn of
rebuilding to take place over the next three years. This of
course assumes that people decide to go back to living
where they were and that entire communities won't instead
decide to uproot and move somewhere else -- something which
appears to be happening amongst working-age people. The
oldies will of course stay where they are.

In addition, the government estimates the impact of
interrupted factory output in autos, electricals,
chemicals, and other high-volume industries as being around
JPY250bn (US$3bn). While this number appears to be
manageable, our guess is that it falls woefully short of
the real impact that the quake and the nuclear crisis in
particular are going to have on the country. If you take
into account the food, entertainment, apparel, beauty,
health/sports, and other discretionary-spending business
sectors, and the rolling power cuts that will run in the
Kanto (Tokyo and surrounds) for at least another 4-6
weeks, then the real cost of this earthquake may be
much higher.

What concerns us is that while the government has announced
special loans for major and mid-sized companies, there
doesn't seem to be much interest in the other 26% of the
domestic GDP, being small companies and proprietor-run
establishments. Our guess is that without some support to
these firms, the number of bankruptcies here in Tokyo will
soar later on this year and the unemployment rate will rise
accordingly. In fact, in 2006, 87% of companies in Japan
employed 20 people or less, so they may not account for
much GDP, but they do account for a lot of workers.

Let's look at two sectors that we feel the government has
underestimated the impact of the nuclear crisis: travel and
food exports.

1. Travel:

Travel accounts for just over 2% of the nation's GDP, or
around JPY10trn. Most of this is domestic travel, but
foreign travelers bring fresh, unencumbered cash into the
economy and so have extra value. This year, the government
was going to try to push for 11m foreign tourists, but
after the earthquake and the nuclear scare, the number of
incoming travelers passing through Narita Immigration
has instead plummeted by 60% from March 11 through 22nd.
In contrast, the number of foreigners leaving surged from
20,000 over the same period a year ago to 190,000. No
wonder the streets in Roppongi look deserted...

Domestic travel is also heavily affected, again going back
to the fact that no one feels like engaging in frivolous
activities while a nuclear crisis is in full swing. As of
last week, domestic travel reservations were down 33% at
JTB and trips North were down 70% while those to Tokyo were
down 60%. Of course bookings are up in the Kansai, as many
head west to relative safety.

2. Food Exports:

Japan's food exports are a small fraction of the GDP, at
around JPY270bn (US$3.27bn) in 2009, and were expected to
rise this year. The leading export is seafood, at
US$1.47bn, but with the leaking of Iodine-131 into the
ocean off the Fukushima power plant, the likelihood is that
volumes will fall sharply for some months. Why are food
exports important? Because with the anticipated signing by
Japan of the TPP trade pact to open up the agricultural
market here, food exports were supposed to provide farmers
with a way of being able to cope with the flood of cheap
imports that TPP will bring about. Unfortunately, now that
many countries have started banning Japanese food imports,
we imagine that the TPP itself will be postponed or thrown
out as well.

One other sector that looks like it will be hit by the
nuclear crisis is high-end property in Tokyo. Basically
those who can afford luxury apartments and high-end land
are also those who are most able to pull up stakes and be
somewhere else: be they expatriate families or wealthy
Japanese retirees. A number of major property developers
have seen their shares fall and we expect this trend to
pick up steam if the Fukushima plant No. 2 reactor turns
out to have been breached. Even if it hasn't, experts are
saying that the nuclear crisis could last for months,
causing the current uneasy batten-down-the-hatches
atmosphere to become highly disruptive to normal business
and consumption in a city which absorbs more than 25% of
all goods and services in the country.

As a result, we're wondering if the economic impact from
the earthquake won't be much worse than the government is
predicting, and whether there won't be a mini "melt down"
of some sectors of the economy here.

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+++ NEWS

- IOM helps foreign residents wanting to leave
- Summer Time switch to save electricity?
- New biodegradable plastic much stronger
- 16 foreign nurses pass national exams
- Higashikokubaru for Tokyo governor?

-> IOM helps foreign residents wanting to leave

The International Organization for Migration (IOM) has
announced a service to help financially constrained
foreigners who were living in the earthquake zone from
Aomori down to Chiba to evacuate from Japan. Apparently IOM
has already helped more than 100 people leave the country
by paying for transportation to the airport and one-way
flights out of the country. ***Ed: Interesting, we didn't
even know there was such an organization. This is the first
time for them to operate in Japan.** (Source: TT commentary
from nikkei.com, Mar 26, 2011)

http://e.nikkei.com/e/ac/tnks/Nni20110326D26JF030.htm

-> Summer Time switch to save electricity?

One of the more interesting ideas to save electricity this
coming summer is to put the country on Summer Time.
Although common elsewhere in the world, after a short
period right after the War, Japan has carefully avoided
setting clocks forward an hour due to complaints from
farmers and others. However, it appears that by switching
to Summer Time and extending the effective day light hours,
the country may save as much as 930,000 kiloliters of crude
oil for power generation -- about the same as what the
nation's rail operators will use over the same 10-week
summer period. (Source: TT commentary from reuters.com, Mar
26, 2011)

http://af.reuters.com/article/energyOilNews/idAFL3E7EQ00I20110326?sp=true

-> New biodegradable plastic much stronger

A company that we really like, Kaneka Corporation, is a
real power house of inventions and new technology and has
come up with another winner. The company says it has fitted
out a trial factory capable of producing 1,000 tons of PHBH
plastic, a biodegradable material produced by microbes from
vegetable oil. If the trial facility works out, the company
will upgrade for 10,000 tons/year. Compared to regular
biodegradable plastics, Kaneka PHBH withstands heat and
stretching better and will be used for supermarket shopping
bags and farm-based PVC applications. (Source: TT
commentary from nikkei.com, Mar 25, 2011)

http://e.nikkei.com/e/ac/TNKS/Nni20110324D24JSN02.htm?NS-query=kaneka

-> 16 foreign nurses pass national exams

The number of foreign nurses passing the national nursing
exams is still just 4% of the total, but at least this time
around 16 Indonesian and Filipino nurses made the grade,
compared with just 3 who passed in 2009. The Health
Ministry agreed last year to make the exams a bit more
foreigner friendly by rephrasing of difficult kanji questions,
and naming some diseases in English. (Source: TT
commentary from japantimes.co.jp, Mar 26, 2011)

http://search.japantimes.co.jp/cgi-bin/nn20110326b1.html

-> Higashikokubaru for Tokyo governor?

Of the five new contenders for the job of Governor of
Tokyo, we believe that only Hideo Higashikokubaru has the
name recognition needed to make a serious run against
incumbent governor Shintaro Ishihara. Higashikokubaru was
the former governor of Miyazaki and prior to that a
well-known comedian. He ended several months of speculation
by announcing he would run the week before last.
Unfortunately governor Ishihara has decided at 78 that
three terms is not enough and will run again. ***Ed: One
wonders if Ishihara will ever be brought to book for the
Shinginko debacle. One billion dollars is a lot of cash for
the city to lose.** (Source: TT commentary from asahi.com,
Mar 09, 2011)

http://www.asahi.com/english/TKY201103080173.html

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

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-----------------------------------------------------------

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors@terrie.com.

*** In TT606 we did a quick round up of radiation facts
and how the fear factor has impacted life and work in
Tokyo. We got lots of feedback, many thanks.

=> Reader 1 comments:

On the numbers side of things. For Radiation Sickness, I
think you meant 500mSv or 500,000uSv, not 500,000 mSv.
[Ed: Yes, indeed]

=> Reader 2 comments:

"Nuclear IS Green Energy." [Ed: Hmmm, he has a point there!]

***********************************************************
END

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+++ ABOUT US

STAFF
Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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