Last month, I wrote an update on Japan’s efforts to cope with the Great East Japan Earthquake of March 11. One of the most dramatic discoveries during my trip to Tokyo was the buzz about the possibility that Japan’s continuing energy problems would encourage an exodus of industrial investment in Japan.
The shock was not the uncertainty about Japan’s future, but rather that the companies that were losing faith in Japan as a site for future investment was none other than Japan’s own industrial leaders.
The idea that the current confusion in Tokyo over energy policy could become the straw that breaks the camel’s back of corporate confidence has only intensified in recent weeks. With 37 of Japan’s 54 nuclear reactors offline at the moment, the need for conservation efforts affects more than simply the region supplied by the Tokyo Electric Power Company in the northeast grid. The western metropolis of Osaka, Kyoto and the Kinki regions, all supplied by the Kansai Electric Power Company, are also expected to run short of electricity, and the government has issued a 10 percent target for electricity conservation in the coming months. The longer term question of how to recalibrate Japan’s energy policy has stalled all efforts to get Japan’s reactors up and running.
But the growing anxiety about Japan’s energy supply suggests an even more difficult question: will Japan’s industry continue to sustain confidence in national economic recovery as this larger question of energy policy is resolved? Or will the prognosis that Japan’s major corporations will escape overseas to sustain their own profits trump the national reconstruction effort?
After the recent distressful rhetoric, last week produced a more hopeful signal from one of Japan’s largest global corporations. Toyota Motors Corporation announced its new Tohoku revitalization initiative, including both donations to help offset the social impacts of the Great East Japan Earthquake as well as a broader investment plan for Toyota’s own operations. At the heart of this package is a consolidation of Toyota’s suppliers, and an investment in future production that is based on confidence in the ability of the workers and communities of Tohoku to rebuild.
The Toyota decision stands out in the current mood in Tokyo for another reason. Toyota’s choice was all about business, but it was also a commitment to Japan’s recovery, and a clear signal that investing in Tohoku can be Japan’s road to recovery.
Japanese corporations must invest in Tohoku and other regions of Japan that so badly need Japanese capital and jobs. Recovery cannot be achieved without private sector leadership, and foreign firms will not invest if Japan’s own companies are hesitant to do so.
As important, Japan’s business leaders must continue to make their voices heard, and to assume greater visibility in the public discourse over Japan’s recovery. They must advocate, cajole and demonstrate the kinds of reforms needed for Japan’s recovery. In short, Japan’s entrepreneurs and manufacturers must stay in Japan and shape the future they believe in.
*In the interest of full disclosure, Toyota Motor North America is part of a consortium of corporations that contribute to CFR’s Japan Program.