As Japan battles to avert a major nuclear disaster at the Fukushima nuclear plant, many are questioning whether the Japanese government is providing the necessary leadership for guiding the country through the burgeoning crisis.

Yesterday morning, Japanese prime minister, Naoto Kan, reportedly stormed into a meeting of senior executives of Tokyo Electric Power (Tepco), operates the stricken Fukushima Daiichi nuclear plant in north-east Japan.

He expressed his fury at the company’s top management for failing to immediately report the blast at the plant on Saturday. According to some reports, Kan and other senior Japanese cabinet ministers first learnt of the explosion at reactor No.1 after seeing it on television.

But although Kan is now attempting to take control of the situation by setting up a joint crisis committee, consisting of government and Tepco representatives, there are concerns that the move may have come too late. After days of confusion over responsibility, and the constant down-playing of the gravity of the situation, confidence in the Japanese government’s handling of the situation is wilting.

Later in the day Kan displayed a greater level of openness when he addressed the Japanese people and warned of possible new radiation leaks at the nuclear power plant. Residents located within a 30-kilometre radius of the Fukushima plant should remain indoors, he said. Previously, only those living within a 20-kilometre radius had been advised to stay indoors.

But many Japanese feel frustrated that they lack reliable information about the possibility of a meltdown, and what measures they should take to protect themselves. What, for instance, should the 30 million people living in the Tokyo metropolitan area do if radiation levels climb even higher?

As der Spiegel magazine puts it, “Fear is mounting amongst the Japanese and their trust in Tokyo’s announcements is dissipating quickly. The numerous panels of experts being interviewed on Japanese television are also expressing their bewilderment at the paucity of information coming from the government and Tepco. ‘Why aren’t they giving us clear information?’ they ask. ‘This is really getting irritating.’ By now you can hear commentary like that on all the channels.”

At the same time, the Japanese share market is reeling, as investors try to calculate the cost of the lost output caused by the devastating earthquake and tsunami in north-east Japan, and the impact on precarious government finances.

The Bank of Japan has been strenuously pumping liquidity into Japanese financial markets, to ensure that banks and financial markets keep working. On Monday, it injected ¥15 trillion ($US180 billion), or the equivalent of 30% of the US central bank’s entire QE2 program.

But even massive injections of liquidity by the Japanese central bank will not replace the drop in output caused by the loss of power from the Fukushima nuclear plant. Tepco, which supplies about one-third of Japan’s power, has predicted that electrical shortages are likely to last until at least the end of April.

Already Japanese car makers such as Honda, Toyota and Nissan have suspended production, while electronics firms including Sony and Toshiba have temporarily closed plants in earthquake-affected areas.

Even when the big manufacturers resume production, their efficiency is likely to be hampered due to supply shortages. Japanese companies, which were the pioneers of just-in-time supply techniques, typically keep low levels of inventory. Instead, they depend on many small suppliers to deliver parts as required, and damage from the latest disasters could disrupt production at these small suppliers for months.

And there are also concerns how Japanese government finances — already straining under a huge debt burden — will cope with the extra costs of rebuilding Japan. Kan has signalled that he’s working on a supplementary budget to fund relief work, but there’s little room to manoeuvre. Japan’s gross public debt already stands at about twice annual Japanese GDP. In January, ratings agency Standard & Poor’s downgraded Japan’s credit rating in January, saying the country lacked a coherent strategy to address its fiscal challenges.

Before the earthquake and tsunami, Kan’s popularity had already plunged below the dangerous 20% level, political gridlock had delayed the passage of his budget, and he was fighting off calls for his resignation, amid claims that he had taken illegal political fund donations.

But his biggest political challenge lies ahead. Will he be able to demonstrate the political leadership necessary to steer the country through its current crisis?

*This article first appeared on Business Spectator.

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Peter Fray
Peter Fray
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