日本地震后更有信心吗?

The senior advisor at the Center on Japanese Economy and Business at Columbia Business School, Alicia Ogawa, sees the recent earthquake and nuclear disaster in Fukushima in Japan as an opportunity.

“There is reason to be optimistic about it in a weird way,” she says.

An expert on Japan’s economy, Ogawa was Managing Director at Lehman Brothers until 2006, where she was responsible for managing the firm’s global equity research. She believes that the crisis will set the path to a loosening of rules in the labor market, rising property prices and an opening of the borders to foreign talent. “Now everybody is going to have to do anything they can and the country will just have to welcome that,” she says.

Ogawa also thinks the disaster does not necessarily spell the end of nuclear power in Japan, and that recent events will strengthen, rather than weaken, Japan’s confidence going forward. Prior to Lehman Brothers, Ogawa spent fifteen years in Tokyo, where she was a top-rated bank analyst and Director of Research for Nikko Salomon Smith Barney.

Insititutional Investor: What do you think are the estimated costs of the physical damage of the current disaster?

Ogawa: I don’t think anybody really has a clue. The estimates for the insurance industry range from 10 billion to 25 billion. That is a pretty big range. I am more interested in how the costs will be shared than in the numbers.

The private insurance industry is going to take a big hit and so will Japanese individuals; I think the coverage rate of people in the most affected area for an earthquake insurance is only 30 percent. So 70 % of the people do not have any insurance that can cover their losses.

The government is responsible for a lot of that loss. The higher the losses, the more the government picks up the cost. In other words, the loss-sharing ration between the private sector and the Japanese government goes up. That is another strain on the fiscal balance. The numbers are going to be huge and nobody can really say what it is.

Most of the brokers are putting out estimates of about Y 16 trillion ($197 billion) for the cost of rebuilding. They are basing that off the experience of Kobe. The World Bank has just come out with an estimate of up to $235bn. But neither of these figures takes into account the damage due to the Fukushima power plant issues.

Do you think the recent catastrophe can be compared to the Kobe earthquake?

我认为它在许多方面是不同的。扩大nd of the damages are quite different, both regarding physical property and loss of human life. [They're] different also in terms of the economic cycle. Japan was even worse off in its economy when Kobe struck. Today, the Japanese economy was more on the up-swing than on the downside. The growth of China, which did not really exist in the same way when Kobe struck, and the big demand that comes with it, have really led the Japanese economy do relatively well over the last year.

Will Japan be able to finance the reconstruction?

Japanese fiscal health is delicate. What saved them so far is that they have not had to go overseas to borrow. The minute they have to go overseas, interest rates are going to jump.

Second thing is that there will obviously be a stir in domestic demand. All these houses will be rebuilt and people will have to buy new cars and so on and so forth. That is an interesting situation because there is a lot of savings that could be mobilized.

When we think about the long run, Japan is not going to be able to maintain the rules that have worked so well for them until recently, but have been a barrier to change. I am talking about the seniority system, where everybody gets paid the same, based on your age, and the very rigid labor system, where you apply for a job out of college and if you don’t get one then basically you never have a chance.

These two things will probably have to change because the demand for labor is going to be so fierce. Obviously market prices will have to reflect talent and demand for those types of services.

The attitude towards immigration is going to have to change. Clearly there is not going to be enough talent, and so I would anticipate Japan will be welcoming newcomers as part of the labor force.

In the long run, I think it is going to be a very interesting time for Japan. In the short run of course it is awful. The fiscal situation is going to come in a greater drift.

How will it be able to finance the reconstruction?

There is a lot of cash on corporate balance sheets in Japan, probably as high as it has ever been. There is a lot of money to expense inside the country.

There is a real prospect that interest rates will have to rise. Then again, inflation in Japan would not be a bad thing. The reason why people are not buying things or not building houses or even having kids is because there is that mind set that salary and land prices have been going down for the last 15 years. If they start going up again, people might become more optimistic about the future.

In the short run, the question of how they are going to finance the reconstruction: Issuing Japanese Government Bonds or JGB’s would be kind of unsettling.

A possibility is that they are going to raise taxes which may put a constraint on demand.

Is Japan going to rely more on oil than on nuclear power going forward?

Nuclear power was supposed to be Japanese answer. There is obviously going to be some political, populist resistance towards nuclear power outside of Japan. I am not sure how strong resistance will be domestically. I think the Japanese have a different level of comfort with atomic energy. People don’t have the same kind of horrified immediate reaction to it. Nobody likes the idea of radiation but people understand that exposure to radiation is not necessarily fatal.

Nuclear energy and this particular accident are being far more overplayed in the foreign press than in the domestic [Japanese] press.

What are your views on Japan’s society going forward?

Yes, I think it will give the country the confidence that they can deal with such a horrific event and come out at the other end.

There is a renewed sense of “we are all in this together,” which was beginning to fall apart, because of the fractionalization of politics and also because of the labor situation I mentioned. Now they feel like there is reason to be optimistic about it in a weird way. There will be a freedom from a lot of the rules that were restricting people from leading creative and innovative and individualistic lives. Now everybody is going to have to do anything they can and the country will just have to welcome that. Whether it is your place in line or not. I think there is a sense of optimism in a weird way.