When Typhoon Wipha flooded Japan with heavy rains last week, the operator of the Fukushima nuclear power plant ordered precautionary measures to prevent leakage of contaminated water. Ever since the March 2011 earthquake and tsunami caused a reactor meltdown at the plant, Fukushima has become a symbol of a Japanese nuclear strategy and energy supply in disarray. As the clean-up from the disaster continues, all fifty of Japan’s nuclear reactors have been taken offline, creating a large shortfall in energy production that Japan has had to fill from abroad.
Growing dependence on imports
According to the U.S. Energy Information Administration (EIA), Japan falls far short of providing enough energy for its domestic uses, with only 16% domestic energy production. Not surprisingly, Japan needs to import heavily — it is the world largest importer of liquefied natural gas (LNG). Before the disaster at Fukushima and the following reevaluation of nuclear power in Japan, nuclear sources supplied 13% of Japan’s energy consumption. The EIA notes in another report that “Japan’s electric power utilities have been consuming more natural gas and petroleum to make up for the shortfall in nuclear output…” With this shift, fossil fuel use has jumped 21% in 2012 compared to 2011 levels.
High energy costs in the near term (the IMF forecasts that the spot price for crude will remain above $100/barrel for 2014) pose a problem for Japan’s trade balance. As Japan imports more fossil fuels, its trade deficit widens (Japan ran a surplus before 2011). This hurts its current account, which has shrunk considerably. While the depreciation of the yen would usually helps by making exports competitive, the IMF’s Article 4 consultation with Japan noted that the weaker yen has yet to improve the current account.
Between a rock and a hard place
The higher energy costs in Japan have not, however, turned consumer opinion back in favor of nuclear power. According to a recent poll, 31% of 1,085 Japanese citizens surveyed said they had not felt any pinch from higher utility bills, and 41% said they felt the effect “a little.” This poses a political challenge for Japan. Japan’s leaders would undoubtedly prefer to be able to rely on domestic nuclear energy production, but restarting nuclear reactors with Fukushima continuing to make headlines is political poison.
