As Japan has now raised its nuclear alert level to 5 over on the International Nuclear and Radiological Event Scale, the Japanese government is surely assessing the range of scenarios that could develop as a result of its and TEPCO's attempts to prevent a nuclear meltdown at the Fukushima-Daiichi nuclear power plant. Information is unreliable and the situation remains fluid. This article examines three potential scenarios and their implications.
1. A meltdown is avoided and radiation leaks stay at acceptable levels.
This looked increasingly unlikely last week, however attempts to begin to cool the fuel rods and connect the plant to the power grid appear to have been successful. If this effort translates into actually delivering power to each reactor, it could result in the restoration of water pumping equipment. TEPCO and the government have already stated that damage to some of the reactor cores and containment shells will require the permanent closure of Fukushima.
Even in this best case scenario the financial cost to the Japanese government and its people will be enormous, presuming eventual reconstruction of northeastern Honshu island occurs, but there will also be a cost in terms of reduced national power generation capabilities. Japan derives about 24% of its power from nuclear energy. Fukushima represented approximately 4,700 Mw of electricity generation capability, or about 10% of the country's total 49 gigawatts of installed nuclear generating capacity, derived from 54 operating plants. Given that the nuclear plants at Onagawa and Tokai have also been taken off line as a result of the quake and tsunami, and that the combined generating capability of the three idled plants is a total of 12,000Mw (12 gigawatts), up to 24% of the country's total installed nuclear generating capacity will be temporarily, and possibly permanently, removed from the grid. This will clearly have a negative impact on the country's ability to operate normally for some time to come.
It is difficult to make any definitive predictions at this point in time regarding the depth of a renewed Japanese recession, or the ultimate cost of rebuilding, but Barclay's Capital estimates that damage from the disaster could equal up to 3% of Japan's GDP (US$125-200 billion), since the areas hardest hit by the disaster accounted for 6-7% of Japanese GDP. This puts this disaster on a par with the 1995 Kobe earthquake, although other estimates put the cost at double that of Kobe. Reconstruction after Kobe took less than five years and some analysts are predicting a similar time-frame this time round.
If power shortages are not efficiently addressed and reconstruction of the area's infrastructure is not rebuilt quickly, it seems certain that Japan's economic performance will be severely impacted, contrary to the rosy projections of some economists. Ongoing problems at Fukushima have so far prevented the government from drafting an emergency budget to begin to address the reconstruction effort. Should things end up well at Fukushima, the disaster could actually provide the economic stimulus Japan has needed for more than a decade to kick start its moribund economy. Fortunately, damage to most of Japan's large scale industrial and commercial interests was relatively limited and most major companies' ability to continue to operate should not be severely impeded.
2. Partial meltdown, strong radiation concerns.
In this scenario attempts to restore damaged reactors' cooling systems fail, or at least fail to prevent significant radiation leaks. This would render the current 30 kilometer exclusion zone semi-permanent as containment efforts continue, and may prompt the government to widen the exclusion zone to 50 kilometers. Reconstruction in the quake and tsunami impacted areas outside the exclusion zone would presumably continue, but hundreds of thousands, and possibly millions of Japanese citizens would need to be permanently relocated.
Reconstruction will surely be negatively impacted by the disruption in transport routes to north and north-eastern Japan. Construction equipment and materials will have to be re-routed around the exclusion zone which could significantly delay the reconstruction effort in Miyagi prefecture particularly, the region most affected by the tsunami.
In some respects this scenario would be the worst for Japan as uncertainty over the fate of the Fukushima reactors could paralyze policy and planning decisions on a medium-term basis. It may still take as many as 10 years for the cores of each reactor to completely cool down and be deemed 'safe'. This process may require controlled releases of small amounts of radiation on an ongoing basis, with an inevitable, long-term impact on the food chain and water supplies. Importers of Japanese food products -- such as China and South Korea -- have already expressed concern over potential contamination of products such as spinach and milk, and have promised to tighten regulation of Japanese imports.
The region of Japan that has been most severely affected is primarily an agricultural area in the Tohoku region, which produces almost a quarter of Japan's rice crop. While Japan's mountainous terrain may have ensured that significant damage to crop fields was relatively limited by the tsunami, radioactive contamination poses a more insidious and long-term threat. Should radiation leaks continue over the next few years and containment efforts drag on, the impact of this disaster on Japan's food security may be long lasting.
Another potential casualty of this scenario could be the incumbent Democratic Party of Japan (DPJ). Having wrestled power in 2009 from the Liberal-Democratic Party (LDP) -- which had governed almost continuously since 1955 -- last week's earthquake and tsunami has completely upended its governance agenda. If handled well, the crisis could strengthen the DPJ and reinforce an emerging two-party political system in Japan. However, the uncertainty posed in this scenario, combined with mounting criticism of the government and Prime Minister Kan's low approval rating prior to the disaster (at 20%), seems likely to spur a change in government. Japanese voters may choose the implied stability and predictability of the LDP over the uncertainty associated with the DPJ.
3. A meltdown occurs. Significant radiation leaks force mass relocation.
In this worst-case scenario, the area around Fukushima Daiichi becomes permanently uninhabitable, or at least until the radiation threat is well and truly removed. A 50 kilometer exclusion zone stretching north, west, and south of Fukushima would render a large swathe of northeast Honshu off limits. Since prevailing winds would occasionally blow radioactive material north and south of Fukushima, tens of millions of Japanese would need to be relocated to the southern part of Honshu. The impact on the Japanese economy would be severe and the global supply chain would be moderately impacted. Japan produces 35% of flash memory chips, used in tablet computers and smart phones, about 20% of global semiconductors, and a significant portion of automobile components. In recent years other Asian countries, such as China, South Korea, and Taiwan, has assumed a greater percentage of the production of once Japan-dominated high tech products. But the global supply chain has already felt the impact of the quake and tsunami, with production facilities as far away as the United States already being forced to revise production schedules or temporarily suspend production.
The 30 kilometer exclusion zone established around Chernobyl in 1986 required the evacuation of more than 120,000 people, principally in the cities of Chernobyl and Pripyat. Today, 25 years after the disaster, the zone remains a largely uninhabited wasteland. Unlike Chernobyl, a substantial population resides in the affected area in Japan. Miyagi prefecture - the principal zone affected by the tsunami - has a population of 2.3 million, while Fukushima prefecture - where the bulk of the nuclear exclusion zone is currently located - contains 2 million inhabitants. The entire northeast of Japan, the Tōhoku region (which has six prefectures including those of Miyagi and Fukushima) has a population of almost ten million.
How and where these people could be relocated would pose an immense challenge to the Japanese government. Japan is already the fourth most densely populated country in the world and a forced relocation of millions of people would pose severe economic and logistical problems, which would transport Japan to the top of the list of countries with the highest number of internally displaced people in the world. Foremost among the government's problems would be the immediate need to identify land upon which to build housing - something already at a premium in Japan.
Would the relocated population be content with less property than they had prior to the disaster? Would social tensions rise between displaced victims and the established communities where they must resettle? While Japan can boast a degree of social cohesion that is the envy of many nations, the possibility of severe social unrest cannot be underestimated, particularly if the government is deemed not to be handling the crisis in a competent manner. Mass migration towards Tokyo and other major cities to the south would likely represent many people's best chance of finding employment. This would of course be derailed as an option if Tokyo were to become contaminated by radioactivity.
In due course, as more and more people were forced to compete for work in a smaller territory, unemployment would rise dramatically, eventually prompting a wave of emigration from Japanese shores. The employment issue could be partially mitigated by the forced departure of a substantial proportion of Japan's nearly 2 million immigrants, which would raise yet another complication in the relocation effort.
A more serious question would be the long-term effect on the Japanese economy. Following the recession that is widely expected in the wake of this disaster, analysts expect a reconstruction boom to bring Japan back into positive growth before the end of 2011. However, should this worst-case scenario unfold, the relocation of millions of people would divert spending and investment away from the tsunami-stricken area to different regions of Japan, with uncertain implications.
There is already a substantial degree of mistrust among the Japanese people and the international community over the information that has been broadcast by the Japanese government to date. Many people and governments are concerned that the plethora of problems arising from the disaster may be worse than the government has admitted. For that reason we cannot eliminate any scenarios from the equation just yet, although we can say that, at least as of now, scenario three is looking increasingly unlikely, and scenario one appears to be the likeliest.
The only thing that seems certain at this time is that Japan's people and government must now endure their greatest challenge since 1945. We expect they will do so with characteristic grace and determination, and will ultimately be successful in rebuilding their nation quickly and well, as they do in all things.
Daniel Wagner is managing director of Country Risk Solutions (CRS), a political risk consulting firm based in Connecticut, and also senior advisor to the PRS Group. Daniel Jackman is a research analyst with CRS, based in London.
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