Japan's Unsavory Options

03/17/2011 10:14 am ET | Updated May 25, 2011
  • Daniel Wagner CEO of Country Risk Solutions / co-author of the book "Global Risk Agility and Decision Making".

Japan's first week of this crisis has revealed to the world what many Japan watchers have known for many years -- that it was woefully unprepared to deal with an inevitable severe earthquake and its repercussions.

TEPCO (the Tokyo Electric Power Company) and the Japanese government have unfortunately fulfilled the expectations of many who are familiar with their histories addressing crises, in which they have proven either inept or purposely misleading in delivering trustworthy information to the public. To proclaim, as one Japanese minister did last weekend, that the amount of radiation released at that time was equivalent to a CAT scan was simply absurd. We should not have expected more from TEPCO, which has in previous instances delivered purposely misleading information. But the Japanese government had an opportunity to shine in managing this crisis; it has regrettably fallen fall short of the mark.

Had TEPCO and the government either had a handle on what was occurring at the Fukushima nuclear complex, or been honest and forthright in reporting what was occurring, they might have put themselves in a position to reach out for international assistance more rapidly, and the events over the past week at the complex may not necessarily have unfolded as they have.

U.S. government officials have expressed alarm at how this ordeal has been handled and envision a possible 'dead zone' in Northeast Japan for decades. We could see a scenario in which a large swathe of northeast Japan becomes permanently uninhabitable. Were that to occur, the impact on the Japanese economy would clearly be severe and would preclude the idea of rebuilding areas impacted by the quake and tsunami. As bad as that would be, the impact on companies expecting to participate in the rebuilding effort would be unwelcome, and the anticipated 'bounce' in global share prices as a result of spending an anticipated $200 billion to rebuild the area would prove to be premature, since it may not happen at all.

Even if it is determined that there is no breach of the reactor cores -- which would be a real miracle, and completely unexpected at this juncture -- it will take many months and possibly a year or more for the cores of each reactor to completely cool down. This may require controlled releases of small amounts of radiation into the atmosphere on an ongoing basis, with an inevitable, yet unquantifiable long-term impact on the food chain and water supplies. Can regular exposure to high levels of radiation ever be acceptable to people living up or down wind from the reactors? Certainly not. The result would presumably be mass exodus from northeast Japan, and even possibly from cities as far away as Tokyo.

The Japanese government, its people, and its businesses face some unsavory choices. First, they must ask some very hard questions about what can realistically be accomplished. Is it realistic to presume that the area within 50 kilometers of the Fukushima complex can be repopulated? Does it make sense to imagine rebuilding in the quake and tsunami impacted areas? And can the radiation be truly contained in the absence of kamikaze-type workers who will agree to die for the greater good of the Japanese people?

Second, if mass forced relocation is required, how can tens of millions of people be moved to safe ground within Japan? This will be a serious problem, and will undoubtedly require creation of millions of temporary shelters and ultimately, millions of permanent residences in the southern part of the country. This is where any construction boom could occur.

Third, how can thousands of businesses either be relocated or shift their mode of operation to alternative locations? What impact will this have on the national and global supply chain? How long would it take to make such a transition?

Whether Japan ultimately faces this nightmare scenario or is able to salvage its northeast through some sort of miracle, TEPCO and the Japanese government must do a much better job managing the crisis and delivering believable and trustworthy information to the Japanese and global public. Fukushima is evolving into what will surely become the world's worst nuclear accident. Japan, and the world, are learning some valuable lessons about what needs to be done to prevent a similar event from ever occurring again.

Daniel Wagner is managing director of Country Risk Solutions, a political risk consulting firm based in Connecticut, as well as senior advisor to the PRS Group.