On 11 March 2011, an earthquake of magnitude 9.0 occurred in eastern Japan. The tsunami struck a wide area, mainly in the Tohoku region. Approximately 18,000 deaths and missing people have been recorded. In addition, the nuclear power plant in Fukushima was damaged, leading to a meltdown of nuclear reactors. Due to the large amount of leaked radioactive material, access to neighboring municipalities was prohibited, causing damage to the lives of many people. This book is a collection of papers analyzing the correspondence from the viewpoints of law and economics, as well as recording the manner in which the Japanese government responded to the Great East Japan Earthquake. It is not feasible for the government to prematurely provide sufficient protection to victims in the event of a major disaster. If that were known in advance, citizen may become negligent in responding to risks and preparing for disasters, notably in dangerous areas. This is shown in the pioneering work of Kydland and Prescott (1977). Therefore, it is necessary for the government to commit to the kind of crisis response it will provide, in advance of the events. For example, it is impossible to compensate indefinitely for collapsed houses. When a large-scale disaster occurs, a moratorium is temporarily put into effect in urban areas to secure the time to formulate a reconstruction plan. To activate the moratorium, the benefit must exceed the cost. However, in the Great East Japan Earthquake, small cities like Ishinomaki also suffered damage. Chapters 3 and 4 elaborate the difficulty of a moratorium in small cities, since the benefit to them is small, even if city planning projects are implemented. The authors state that the government can avoid the responsibility of guaranteeing protection in the aftermath of a disaster by proposing to inform residents of the disaster hazards in advance, after which, residents may decide whether or not to live and build in these areas. Furthermore, in the nuclear power plant accident during the aforementioned earthquake, compensation for damages became a problem. In this particular case, the government should have taken countermeasures in advance. Chapter 8 presents a detailed explanation on the nuclear damages compensation system in Japan, in particular the Nuclear Damage Compensation Facilitation Corporation, noting its similarity to the Deposit Insurance Corporation for banks. In both cases, insurance premiums are collected from the subject insured, and financial assistance is made with insurance money in case of emergency. Furthermore, if support beyond that range is needed, the government will engage. The authors also clarify that such systems for nuclear power plants had already been discussed in the 1960s, when the nuclear damages compensation law was enacted. Chapter 10 uses theory to analyze the optimal nuclear power generation capacity that will maximize net social benefits. According to the author, ‘considering the stable supply of energy, economic efficiency, adaptation to the environment’ (p. 243), the optimal nuclear power generation will be nonnegative from theory. In addition, if all nuclear power companies can bear the social costs of nuclear power plant accidents, the attentiveness level of operators will become consistent with the social optimum level. Chapters 11–13 and 15 comprehensively discuss compensation for damages in the Great East Japan Earthquake. Since the Japanese government is not liable for compensation following the Act on Compensation for Nuclear Damage, the nuclear power plant operator owed the compensation for damages caused by the earthquake. However, even though the amount of compensation exceeded the amount that could be paid by the nuclear power plant operator, corporate reorganization procedures were not carried out, and taxpayers and electricity users were to bear 82% of the cost. In response to such a situation, the authors propose legal revisions, such as the possibility of corporate reorganization procedures, granting of general statutory liens to persons with damages claim, and granting the victim priority to deposit of nuclear operator. The exhaustibility of national finances makes issues related to the economics of emergency response important. The Japanese government’s outstanding debt is extremely high in developed countries. Chapters 9 and 14 discuss the current state of the Japanese government’s financial difficulty, and how to respond to the rise in interest rates due to the financial crisis. In addition, using the Keynesian macroeconomic model, the authors simulate potential changes in the economic growth rate, government bond interest rate, and fiscal balance if a disaster occurs in 2020. Chapter 16 estimates that, if a rare disaster, such as an earthquake or tsunami, happens to occur, the risk premium of the stock will increase, leading to a decline in the interest rate on government bonds. Furthermore, in consideration of the default risk of government bonds, the authors’ simulations show that, as the default probability increases, the interest rate of government bonds would also increase greatly. The regression analysis in Chapter 5 shows that municipalities with financial margin tended to conclude a disaster agreement after the disaster. Furthermore, they show that not enough support was provided even if the municipalities signed the agreement before the earthquake caused damage. From these results, the authors point out that there is a need for efficient matching, such as concluding a disaster agreement with local governments far away. Another interesting argument presented in this book is that, even if carefully prepared, crisis management measures designed in advance are not necessarily executed because of human error. In Chapter 6, the authors explain how the Fukushima Daiichi nuclear plant that was damaged in the tsunami caused by the Great East Japan Earthquake had fallen into the worst situation—a meltdown and melt-through. This was due to incorrect judgment by the director, site workers, Tokyo Electric Power Company (TEPCO) headquarters, and Nuclear and Industrial Safety Agency (NISA). The Fukushima Daiichi Nuclear Power Plant prepared operating procedures for accidents in three stages, from the lowest to highest degree of emergency—Abnormal Operating Procedures (AOP), Emergency Operating Procedures (EOP), and Severe Accident Operating Procedures (SOP). However, in fact, only SOP was emphasized, which made the situation worse. Recording the difficulty of such crisis management will be important not only for nuclear accidents, but also for dealing with various other accidents. Chapter 7 offers a detailed investigation of the technology selection and agreement formation processes regarding contaminated water of the affected nuclear power plant. The problem dealt with in Chapter 6 is an example wherein people acted incorrectly despite the obviously correct countermeasure. However, in the case verified in this chapter, there was an uncertainty regarding appropriate technology. Furthermore, there was the possibility that the choice would work advantageously for TEPCO and its shareholders/creditors. The choice of technology under such circumstances will be extremely difficult. In addition, even if proper selection is made, the authors state that appropriate and prompt information disclosure is necessary for residents and those related to fisheries to understand it. Some of the problems presented in this book may be considered economic solutions. For example, Chapter 4 suggests that, to keep residents from living in disaster-risk areas, it is necessary for the government to commit to not support said victims in the event of a disaster. Kono et al. (2013), on the other hand, explain that the government guarantees adequate subsidies for disaster victims, informs residents of areas where tsunami damage is expected to be dangerous, and levies some additional property tax. These policies enable residents to encourage selection without going against basic human rights. In addition, certain proposals, such as inducing behavioral economics and legal restrictions, could be solutions, considering that nuclear power plant operators did not immediately take the initial action at the time of the earthquake, but took the SOP at a stroke. The Ministry of Finance (2002) also put forward an important question—as the Bank of Japan can issue its own currency, does the Japanese government not default, as long as it is issuing government currency denominated in its own currency? In their article, Ito and Yoshikawa (2003) claimed that the Japanese government would default if public debt to GDP ratio reached 200%. The EU accession condition sets the long-term sustainable government debt to 60% of GDP. However, the Japanese economy has not yet fallen into crisis. On the other hand, Braun and Joines (2015) propose a method of passing by raising the consumption tax; and in this book, it may have been possible for scholars and practitioners to discuss various such solutions. Although these are personal requests, each chapter in this book includes comprehensive research on each issue. It is a valuable book for its approach to the Great East Japan Earthquake from the legal studies and economic perspectives. This book will be a starting point for discussing measures to be taken in the event of future nuclear accidents. References Braun , R. Anton , and Douglas H. Joines . 2015 . ‘ The Implications of a Graying Japan for Government Policy ’, Journal of Economic Dynamics and Control 57 : 1 – 23 . Google Scholar CrossRef Search ADS Ito , Takatoshi , and Hiroshi Yoshikawa . 2003 . ‘Keizai Gakusha Group Kinkyu Teigen’, Nikkei , March 19, 2003: p. 33. Kono , Tatsuhito , Naoki Kitamura , Kiyoshi Yamasaki , and Kazuki Iwakami . 2013 . Quantitative Analysis of Dynamic Inconsistencies in Disaster Prevention Infrastructure Improvement: An Example of Coastal Levee Improvement in the City of Rikuzentakata’ , Environment and Planning B: Urban Analytics and City Science , 43 ( 2 ): 401 – 418 . Kydland , Finn E. , and Edward C. Prescott . 1977 . ‘ Rules Rather than Discretion: The Inconsistency of Optimal Plan ’, Journal of Political Economy 85 ( 3 ): 473 – 492 . Google Scholar CrossRef Search ADS Ministry of Finance, Japan . 2002 . ‘Summary of Letter to the Rating Agencies’ . Available at http://www.mof.go.jp/about_mof/other/other/rating/p140430e.htm (accessed 5 September 2017) . © The Author(s) 2018. Published by Oxford University Press in conjunction with the University of Tokyo. All rights reserved. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices)
Social Science Japan Journal – Oxford University Press
Published: May 4, 2018
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