A week before becoming ground zero for the world’s biggest nuclear crisis since 1986, the Fukushima Dai-Ichi plant offered $11 an hour for full-time maintenance work in an area of Japan that was lagging even before last month’s earthquake and tsunami struck.
The wage, the same as McDonald’s Corp. (MCD) pays for part-time work in Tokyo, shows the scale of the northern Tohoku region’s economic blight and indicates towns may never recover from the disaster. Almost 28,000 people are dead or missing and 160,000 are homeless in Tohoku, where 25 percent of the population is 65 or older and job seekers outnumber jobs by two-to-one.
Once the rescue and clean-up is over, Prime Minister Naoto Kan’s government will have to decide whether to rebuild homes, roads and businesses or relocate tens of thousands of people. The challenge: structure investment plans to bring private job creation, beyond the short-term bump from public works.
“To put it very crudely, there won’t be a lot of people left in these communities,” Takayoshi Igarashi, Kan’s special adviser on addressing population decline and rural decay, said in an interview. “Old people will pass away and the young will surely leave for Tokyo. The government now faces this awful choice of whether to invest in rebuilding these areas or leaving them behind.”
Successive governments and Tokyo Electric Power Co. have poured money into the building of bridges, roads and soccer stadiums in places like the Fukushima town of Ohkuma, which has failed to revive the economies in the northeast, said Daniel Aldrich, author of ‘Site Fights: Divisive Facilities and Civil Society in Japan and the West.’ The problem with these “empty box projects” is that they temporarily create construction jobs that evaporate when the work is done, he said.
‘Exponentially Higher’
The 9-magnitude quake and waves as high as 15 meters (49 feet) damaged or destroyed more than 200,000 buildings and leveled entire towns in Japan’s northeast. Sony Corp. (6758), Toyota Motor Corp. (7203) and Sapporo Holdings Ltd. (2501) are among the companies that have shut down factories from damage that the government estimates is as high as 25 trillion yen ($295 billion).
Igarashi said Japan will need “at least” 20 trillion yen to rebuild the area. If residents who have been evacuated from near the nuclear power plant can’t return, the amount of spending needed “will be exponentially larger,” he said.
The disaster struck an economy already mired in its second decade of stagnation and deflation. Japan’s national debt is twice the size of gross domestic product, the result of soaring welfare costs and falling revenue. The benchmark Nikkei 225 (NKY) Stock Average has fallen 6.4 percent since March 10, the day before the catastrophe struck.
Contaminated Vegetables
Tohoku’s six prefectures, with a population of about 9 million, have an average per capita income of 2.6 million yen, 15 percent less than the national figure. In the northernmost prefecture of Aomori, the population fell 4.4 percent between 2005 and 2010, the second-biggest drop in the country, as young Japanese left to find work in the bigger cities.
Radiation from the Fukushima complex about 220 kilometers (137 miles) north of Tokyo has contaminated vegetables and seafood in Tohoku, which depends on agriculture, fishing and manufacturing. Shipments of milk and spinach have been restricted in the area that accounts for more than a quarter of Japan’s production of rice. Radioactive iodine, cesium and cobalt have been found in the sea nearby.
Chief Cabinet Secretary Yukio Edano said April 1 the evacuation of residents near the plant may be “long-term.”
Low-Skill Jobs
“The biggest problem is the nuclear one,” said Itsunori Onodera, a lawmaker with the opposition Liberal Democratic Party, whose hometown of Kesennuma was ravaged by the tsunami. “If the area of nuclear contamination spreads, people won’t live there and there’ll be no reconstruction.”
Most of the region’s jobs don’t require academic degrees or advanced training, Aldrich said. Executives who work in the region come from Tokyo and go home on weekends and some towns that in the 1980s had several schools have consolidated to one.
Three of the prefectures -- Miyagi, Iwate and Fukushima -- account for 99 percent of the casualties from the disaster. In Kesennuma, which had a pre-quake population of 74,000, 2,172 people are dead or missing and 11,211 are in evacuation centers, according to the city’s Web site.
The ruling Democratic Party of Japan and the opposition have pledged to cooperate in funding the recovery and the administration is considering setting up a reconstruction agency to oversee the rebuilding effort. Kan said the first spending package to cope with relief and reconstruction will be compiled this month, without giving details. He promised that farmers will be repaid for their losses, and vowed “full-scale restoration” of the area.
Tax Cuts
Edano said April 7 that an initial spending package could be as much as 4 trillion yen. The opposition Liberal Democratic Party has called for a 5 trillion yen effort, about $5 billion more than South Korea’s 1997 bailout package.
The disaster has also created an opportunity to rebuild some parts of Tohoku, experts say. The first priority will be housing for those who lost their homes, said Itsuki Nakabayashi, an engineering professor at Tokyo Metropolitan University who specializes in disaster recovery and mitigation. After that, the government should consider tax cuts and other incentives to lure businesses to the region, he said.
A new international airport at Sendai, and better road and telecommunication links are measures experts say will help to rejuvenate the region.
‘More Attractive Tohoku’
“Here’s a tremendous opportunity to create a more attractive Tohoku, one that moves away from the concrete state,” said Robert Mason, an expert in environmental policy at Temple University in Philadelphia who has lived in Japan and studied its suburban sprawl. “What’s required is a measured approach of ‘What should we rebuild, where should we rebuild?’”
Kan’s DPJ in 2009 defeated the LDP, which governed Japan almost without interruption in the postwar era in part by railing against the LDP’s support for public works projects that benefited the construction industry. Rebuilding Tohoku with a view toward sustainability could be a way for Kan to make good on his campaign pledge “From concrete to people.”
“Unless you build new and long-term industries there, the kids are going to leave,” Aldrich said. “The long-term problem is that many of the incentives provided have been these infrastructure projects and they haven’t been thinking about how to revive these economies.”
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