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Asia Economy Last Updated: Mar 29, 2011 - 6:12 AM

Japan's prime minister advised to decentralise power from Tokyo to avoid annihilation
By Finfacts Team
Mar 28, 2011 - 6:40 AM

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Shifts in Japan’s Total Population: Click for bigger image. Source: Prime Minister's blog.

An adviser to Japan's prime minister, Naoto Kan, has told him to decentralise power from Tokyo, to avoid annihilation.

Professor Takayoshi Igarashi of Hosei University who was appointed a special adviser to the Cabinet on population issues, days before the catastrophic earthquake, has advised Prime Minister Kan to reduce the role of the capital city to avert an even greater calamity.

“I told the prime minister that nationwide dispersal is the first thing we need to do as we rebuild,” Igarashi said in an interview after meeting with Kan last week. “We have no idea when the big one’s going to hit Tokyo, but when it does, it’s going to annihilate the entire country because everything is here.”

In 1923, the Great Kantō earthquake, at a magnitude of 7.9 on the Richter scale, struck Japan's main island of Honshū. It devastated Tokyo and surrounding urban areas and caused an estimated 100,000 to 140,000 casualties.

Prof. Igarashi is proposing a reconstruction package of at least ¥20trn ($246bn).

Japan has a net (the gross is over 200%) public debt of about 110% of GDP but crucially it funds about 97% of it internally.

American economists, Carmen and Vincent Reinhart, wrote last week: "Thankfully, Japan has a war chest of liquid assets at its disposal: Its authorities have been carefully stockpiling foreign exchange reserves (mostly US Treasuries) for years. At present, this stock is worth more than $1trn, or slightly below 20% of GDP. To rebuild, the logical thing is to cash in some of this horde."

American economist, Robert Pozen of the Brookings Institution wrote (Brookings' link)  in the Financial Times that Japan faces one of the worst demographic situations in the world.

He said a logical response would be for Japan to allow the immigration of significant numbers of young families from other parts of Asia. But Japanese officials have historically resisted immigration in order to maintain a homogeneous culture.

He added: "Finally, Japan’s political establishment is still dominated by rural constituencies, despite electoral reforms a few years ago. This political domination has led to excessive government spending in rural areas on bridges and other construction projects, which have done little to boost Japan’s economic growth."

The Prime Minister wrote on his blog in early March that a  taskforce team within the Cabinet has prepared a project to eliminate childcare waiting lists for 26,000 children, as part of the government's drive to make work and child rearing more compatible.

He said that "Professor Igarashi has been energetically providing recommendations regarding public works and the revival of local areas as well as, among other things, the extremely long-term policy issues of the nature of politics and public administration geared towards overcoming a society with a declining population."

Economists at US investment bank, Morgan Stanley, said in a commentary last week that Japanese GDP could contract by between 1% and 3% in calendar 2011, which would constitute a shortfall of 3-5% compared to the MS pre-quake forecast of +2%. For 2012, the team looks for GDP growth in a range of -1% to +3%, compared to a pre-quake 2012 forecast of 1.9%.

Stricken Nuclear Plant

NHK Television has reported that a Japanese government spokesman has pledged all-out efforts to contain high-level radiation at the damaged nuclear power plant in Fukushima.

Chief Cabinet Secretary Yukio Edano spoke to reporters on Monday as efforts continued to remove highly radioactive water from buildings at the Fukushima Daiichi nuclear power plant.

High levels of radioactive substances were detected in a puddle of water at an underground level of a building housing a turbine of the No.2 reactor.

Edano said the Nuclear Safety Commission is assuming that some nuclear fuel may have temporarily melted and come into contact with water in the vessel containing the reactor before leaking out through an unknown route.

Edano pledged all-out efforts to prevent the highly radioactive water from leaking into the ground water or the ocean.

Work to control the Fukushima Daiichi nuclear reactors was once again forced to stop because of high levels of radiation. CNBC's Allison Browne reports:

Greater damage to Japan's infrastructure could mean greater economic growth proposes Takuji Okubo, chief Japan economist at Societe Generale:

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