by David C. Grabbe
June 23, 2011
"The current situation of the earthquake, tsunami, and the nuclear plants is in a way the most severe crisis in the past 65 years since World War II," Japanese Prime Minister Naoto Kan said at a press conference on March 13, two days after being hit by its most destructive quake and tsunami on record. "Whether we Japanese can overcome this crisis depends on each of us," he continued. "I strongly believe that we can get over this great earthquake and tsunami by joining together."
Though the events of March 11 did not leave Japan devastated, they have the potential for wide-ranging effects, both in the near-term and into the foreseeable future. The ongoing crisis with several nuclear reactors at the Fukushima Dai-ichi plant is the most pressing concern, and Japanese officials have outlined a plan to bring the plant to a cold shutdown within nine months—though that may be optimistic, depending on how much damage has been sustained. Meanwhile, an unknown amount of radiation and radioactive particles is continuing to be released into the air and water around Fukushima, and radioactive particles from Fukushima have been found in varying levels throughout the Northern Hemisphere.
In addition to the danger to health, the earthquake, tsunami, and nuclear disaster are also the most expensive natural disaster on record. The financial cost of direct loss is estimated to fall between a conservative $200 billion (Goldman Sachs) and $300 billion (Japan's government). These estimates do not include the ongoing business losses due to power shortages or to repercussions throughout the global economy.
Though heavily debt-laden, Japan's economy is the third-largest in the world, and it is also the third-largest industrial producer (behind the United States and China). In particular, Japan has specialized in automobile manufacturing, telecommunications, computers, and other industries dependent on microchips. Not only have factories in Japan been shuttered due to direct damage or insufficient power, but U.S. and European factories have also been taken offline, as the parts they need are produced in the closed Japanese factories. This is resulting in economic loss both in terms of the wages of the factory workers as well as not producing goods to sell.
A number of analysts are predicting the contagion to spread further when lower second-quarter corporate earnings are announced on July 1, and the results of the various industrial shutdowns become apparent. This reduced industrial output is not expected to be permanent, though; the most important Japanese prefecture in terms of economic output is the least damaged, and so its economic and industrial output are expected to bounce back as it has from other earthquakes.
Because of Japan's location on the Pacific Ring of Fire, earthquakes—even large ones—are fairly common. As a result of this systemic instability, Japan has been dubbed an "earthquake society"—one whose culture and mindset has been shaped by sudden, radical change and has consequently developed the ability to adjust rapidly when a threshold is crossed. Such a threshold can come in a variety of forms, but it is worth noting that the nuclear disaster, in conjunction with the intensifying unrest around the oil-rich Persian Gulf, has revealed just how vulnerable the island nation is to circumstances outside its control.
While Japan is the third-largest industrial economy, it is entirely dependent on off-island natural resources—including, and especially, oil. This dependency became apparent during the 1973 Arab Oil Embargo, when the critical factor was not the price of oil, but the fact that Japan could not get the oil it needed at any price, leaving its industrial plants without the means to produce. Since then, Japan has invested heavily in nuclear power-generation and has become the third-largest producer of electricity from nuclear reactors (behind the U.S. and France). While nuclear power for a variety of reasons cannot completely replace oil, it accounts for one-third of Japan's energy production.
More than this, nuclear power represents a seawall against the uncertainties of the global system. On March 11, that wall was badly cracked, and Japan has been left feeling profoundly insecure. Due to the shaky nature of its oil supply-chain, based as it is in the unpredictable Persian Gulf, its nuclear-power capacity was damaged and shown to be not as reliable as assumed. Thus, Japan has had its geographic realities revealed starkly.
Prime Minister Kan compared this time in Japan's history to World War II, and there are some parallels. The most striking similarity is that Japan's entrance into the war was in large part a result of an energy crisis. After Japan invaded Indochina in 1940, the United States stopped shipping oil to Japan and started buying up oil produced by the Dutch East Indies (present-day Indonesia) to keep Japan from having it. Facing an energy stranglehold, Japan attacked the United States at Pearl Harbor.
This is not to suggest that Japan's next foreign policy move will be war. Yet, history shows that an energy crisis can strike at the very core of Japan's existence and cause it to respond in dramatic ways (if necessary) to safeguard its energy lifeline. To this point Japan has been content to let the U.S. handle the mayhem in the Middle East, yet all this comes at a time when American allies are not feeling confident in their alliances. Japan is at its lowest point since World War II, and the events of March 11 may be the trigger for Tokyo to begin to reassert itself and modify its foreign policy. For Japan, it is less about geopolitical power than survival.