Yoshihiko Noda: On Record

On August 29, 2011, Japan’s Finance Minister Yoshihiko Noda was elected head of Japan’s ruling-Democratic Party of Japan (DPJ). He is expected to be approved as Prime Minister on August 30 by the DPJ-controlled Lower House. The following sampling of comments by Noda explain his positions on forming a coalition, Japan’s fiscal and monetary policy, […]

Japan’s Surging LNG Demand

Introduction Uncertainty over the future of nuclear power in Japan and the spectre of power-supply shortages continue to weigh on business sentiment and pose downside risk to Japan’s economic rebound. More than five months have passed since the March 11 earthquake and tsunami and only 15 of Japan’s 54 nuclear reactors are in operation (see […]

AUD – Too Strong for Its Own Good?

According to the Bloomberg Correlation-Weighted Indexes, the AUD has appreciated by 9% over the past 12 months, second only to the Swiss franc. The trend is posing new challenges for the economy, with Reserve Bank of Australia (RBA) Governor Glenn Stevens saying “the high exchange rate is exerting a powerful force for structural change.” The […]

Australia’s Ambiguous Carbon Legislation: A Primer

As Australia undergoes a record-level investment boom in its mining sector, the government’s yet-to-be decided price on carbon to be implemented in July 2012 will introduce a new set of costs and investment risks to Australian households and firms. The following primer examines the proposed carbon tax and examines some of its potential costs. The […]

Potential DPJ-Replacements of PM Kan

On June 22, the last day of Japan’s parliamentary session, the Diet approved a proposal by the ruling-Democratic Party of Japan (DPJ) to extend the current session by seventy days in order to ensure passage of legislation for post-earthquake reconstruction. This follows a pledge made by Japan’s Prime Minister Naoto Kan to step down before […]

Meeting Japan’s Energy Needs: An Update

It has been two weeks since Japan was devastated by the March 11 earthquake and tsunami, which shuttered in around 20% of the country’s nuclear capacity and 30% of its refining capacity. According to IHS-CERA, 2 GW of Japan’s nuclear capacity have been permanently lost as a result of injecting seawater into reactors, while another 10 GW—8% of Japan’s total electricity—will be shut in “for several years.” The following addresses how Japan will cope with meeting its electricity and fuel shortfalls, and the obstacles facing the energy sector and their broader implications. (See March 17 RGE Analysis on options available to Japan for meeting energy needs.)

Release of strategic oil reserves and reduction in economic activity will limit crude oil import growth.

Impact of the Japanese Quake on Coal

Japan relies on coal to meet around 25% of its electricity needs. According to Platts, as of March 16, five thermal power stations, the equivalent of 10% of Japan’s installed coal-fired generation capacity, were offline. In the short term, this suggests that coal will play less of a role in meeting electricity shortages than LNG and oil. However, once some of these power stations resume operations, coal could play a larger role in meeting electricity needs. According to Barclays, assuming shut in capacity is 12,000 MW, using the same share of coal that was used to meet lost capacity from Kashiwazaki-Kariwa, Japan will increase its exports of coal by 7,800 tonnes per day. Domestic opposition to the use of coal, as well as policies designed to reduce Japan’s coal consumption, mean it is likely that coal will be used to meet demand in the medium term, but will not be a long-term alternative to nuclear power.

S&P Downgrades Japan, JGBs Shrug

On January 27, 2011, S&P downgraded Japanese long-term debt from AA to AA-, putting Japan’s credit rating on par with China. The ratings agency cited Japan’s rising deficits and the government’s “lack of a coherent strategy to address these negative aspects of the country’s debt dynamics.”  Though its gross-public-debt-to-GDP ratio is highest among OECD countries at around 189%, Japan’s government also enjoys the lowest borrowing costs, with the benchmark 10-year yielding 1.22% the week ending January 28, 2011. Indeed, the impacts of the S&P downgrade on Japanese government bond (JGB) yields were relatively light. The benchmark yield rose from 1.225% to 1.250% on the day of the downgrade and touched 1.195% on January 31, 2011.