Shogo Maeda, Schroders' head of Japanese Equities shares his thoughts about the investment themes that have developed in the wake of last year's devestating earthquake and tsunami.
Shogo Maeda, Schroders’ head of Japanese Equities shares his thoughts about the investment themes that have developed in the wake of last year’s devestating earthquake and tsunami.
In March 2011 Japan was struck by a devastating earthquake, the fourth largest ever recorded in the world, which claimed more than 16,000 lives and devastated the country’s infrastructure, supply chains and exacerbated on-going economic issues.
The ensuing tsunami swept across many cities only to further the damage. One year later, Japan has gone through an unprecedented rebuild and is working towards bringing the country back on track. As the first anniversary of the quake approaches, the progress of the country is commendable.
One of the notable by-products of the earthquake was the Fukushima nuclear crisis. The World Bank estimated the cost of the crisis to be $235bn – one of the world’s most expensive disasters.
However, authorities worked hard to fight the radiation leak and levels continue to reduce as time passes. TEPCO (Tokyo Electric Power Company), the operators of the Fukushima plant and the largest electric power company in Japan, announced precipitous losses.
One year on, we see positive developments around TEPCO including the stabilisation of nuclear reactors and a gradually changing outlook for government support.
Yoshihiko Noda, the Japanese Prime Minister, has been pragmatic in his approach to the nuclear power issue and the earthquake has resulted in a review of how nuclear power – which prior to the quake accounted for close to one third of electricity generation – should be consumed.
Japanese consumers and companies are now proactively reviewing their energy usage. Energy consumption has reduced by 10 to 20% and there is no doubt that energy efficient products will be the focus of consumer-goods producers.
Interestingly, one of the leading house builders, Sekisui Chemical, expects the ratio of its houses equipped with solar panels to rise to 90% in the second half of the current fiscal year, which ends in March 2012 – the ratio was 77% a year earlier.
Therefore, as a result of the disaster and higher energy costs, Japan will become even more energy efficient.