Japan struggles to rebuild

REUTERS

A car drives past piles of wrecked vehicles, destroyed by the March 11th earthquake and tsunami, in Rikuzentakata.

Yoko Kubota & Rie Ishiguro

YAMADAMACHI: Sakari Minato has fixed up his house just enough for his family to move back in. The walls still have holes, the windows are temporarily sealed. You can still see the water marks on the outside of the home left by the March 11 tsunami that roared into this north-eastern coastal fishing town at the speed of a freight train and bulldozed everything in its path.

Minato doesn't know whether to spend the $100 000 needed to completely restore the house or move the family to higher ground away from the ocean. He still doesn't know whether the government will declare his part of town by the coast an uninhabitable tsunami zone.

Five months after Japan's worst disaster in generations left more than 20 000 dead or missing, entire communities along the country's north-eastern coast face a similar dilemma. They have cleaned up much of the rubble and mud, fixed up roads and restored power. Tokyo and local governments, however, have yet to come up with detailed plans and money needed to start the actual rebuilding.

Every day of delay brings more agony for hundreds of thousands of survivors who cannot move on with their lives and makes it increasingly unlikely the economy will get a powerful jolt from the rebuilding effort any time soon.

“Even if I get the house fixed, it could be the case that the national government ends up buying this area in two years because it's a tsunami-flooded district,” said Minato, a 48-year-old auto dealer. “So we stopped fixing the house for now since it's good enough to live in.”

His family barely escaped the deadly waves and a fire that wiped out most houses in his neighbourhood in Yamadamachi, a fishing town about 470km north-east of Tokyo that lost nearly 800 of its 19 400 residents.

When the disaster struck on March 11 government planners, economists and aid agencies looked back 16 years when a magnitude 7.3 earthquake hit Kobe killing 6 400. The conclusion was that the triple blow of a magnitude 9.0 earthquake, a tsunami that reached heights of 15m, and a nuclear plant meltdown crisis, eclipsed anything Japan had experienced in the past half century.

Yet Tokyo was expected to crank out a hefty emergency budget by August, allowing rebuilding to start in earnest in the second half of the year. Even as that timetable slipped, the government remained optimistic that reconstruction would kick in by the final quarter of this year.

Today this looks like wishful thinking and reasons can be found both on Japan's north-eastern Pacific coast and in Kasumigaseki, Tokyo's government district.

“Reconstruction would be a big boost to the economy … But full-fledged rebuilding may need to wait until next year,” said Takashi Onishi, professor of city and regional planning at the University of Tokyo.

Onishi sat on the government's advisory panel on reconstruction and is helping the fishing towns of Kamaishi and Kesennuma in their reconstruction planning.

Japan's steel industry initially counted on reconstruction to boost demand by 3-4 million tons over the next three years, but analysts have slashed their forecasts for next year and beyond by as much as half.

About half of the estimated 22.6 million tons of rubble the tsunami left behind has been cleared and the government aims to remove most of the debris from residential areas by the end of this month.

But out of nearly half a million people displaced by the disaster, 84 000 remain in evacuation centres, temporary housing or with relatives or friends. They will not move on until local authorities decide what they want to rebuild and what to move out of the danger zone. Once that is decided, Tokyo will draw up a national plan and allocate funds.

“How much will the government help? Or big firms and reconstruction funds? We are reliant on them and the question is where is the money,” said Katsutoshi Tomiyama, 70. His jazz café in the picturesque fishing town of Rikuzentakata was swept away and he hopes to reopen it in neighbouring Ofunato, where he lives in temporary housing.

Officials in Tokyo point the finger up north and vent their frustration with how slowly requests from local communities are trickling in. Some local officials admit they are overwhelmed by the enormity of the task.

“Honestly speaking, this is the first experience for us as well and we are now fumbling our way to figure out what and how to move forward,” said one official at a coastal town in Iwate prefecture. The town hopes to have a final reconstruction plan ready by the end of the year.

Similarly in Rikuzentakata, where nearly 1 800 of its 24 250 residents are dead or still missing, officials aim to prepare a plan in November hoping to get money from the regular budget for the next fiscal year starting in April 2012 rather than this year's emergency allotments.

That means that the bulk of the spending may be pushed back well into next year.

“The national government has revealed a basic plan, but the details are not out yet,” city official Takeo Banno said.

The relocation of homes to safe areas, which is one of the focal points of the rebuilding, could take several years.

“In three to five years, large-scale relocation of houses is likely to make headway,” says Shogo Tsugawa, a senior government official in charge of rebuilding of Iwate prefecture.

To be fair, those dealing with the aftermath of March 11 face a task like none before and Prime Minister Naoto Kan was not exaggerating when he said Japan faced its biggest crisis since World War Two.

Rebuilding what was damaged the way it was done after Kobe is not an option. Even before the disaster struck the Tohoku region was in trouble.

Its fragmented fishing industry was struggling to stay afloat, agriculture dominated by small-plot farmers well past retirement age and its working population was shrinking at the fastest rate in all of ageing Japan, having fallen more than 8 percent in the past 15 years.

“We need to avoid just doing the recovery job to pre-quake conditions,” said Ryutaro Kono, chief economist at BNP Paribas, who sat on the reconstruction panel.

Among the proposals are consolidating the fishing business, giving tax breaks for investors and creating special economic zones. They also include relocating homes to more elevated areas and rebuilding ports and other tsunami-ravaged facilities.

Aside from the sheer complexity of the challenge is the slow grind of the political process.

The deeply unpopular and increasingly isolated Kan has struggled to pull together his divided party and get any sort of cooperation from an openly hostile opposition that controls the upper house of parliament.

It took two months to get the first $50 billion batch of emergency spending out and another two to sign off on the next $25 billion installment, both earmarked for the initial relief, clean-up and temporary housing.

More than five months after the catastrophe the main spending plan worth up to 13 trillion yen has yet to take shape and no clarity on how it will be financed.

With Kan on his way out, it is anyone's guess when the “big budget” will be ready.

“Government agencies need to work on the extra budget and next year's budget at the same time but there are limitations in terms of manpower,” one finance ministry official said.

In contrast to exasperated residents, financial markets have been sanguine about signs of slippage in the reconstruction timetable. Those who are now rethinking their growth assumptions beyond this quarter are more concerned about the strength of the yen and clouds gathering over the global economy.

Some economists say their colleagues may be too complacent and point out that while rebuilding spending will come sooner or later, the timing matters too.

Up to now, the base scenario has been that the serious money will start pouring in the final quarter of this year and early in 2012. That would boost sectors such as construction, steel and machinery at a critical time when the global economy may hit a soft patch and the upswing driven by companies restoring supply chains will have run its course.

Now the risk is the big rebuilding effort will not come in time to act as a cushion.

“Come the winter, seasonal factors may further delay construction projects,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.

“From October-December and beyond, the economy is likely to show visible impact from the yen's strength and if there is no lift from reconstruction, the economy's rebound is likely to peter out in the fourth quarter,” Kumano says.

While the economy may still get a reprieve if Japan's main export markets recover, those living in the belt of destruction on the coast can only wait or leave.

Hiroki Haga, 63, whose newspaper delivery service in the coastal town of Otsuchicho was washed away by the tsunami, says the risk is that young people will pack up and look for work elsewhere.

“The basics of how the town should be rebuilt are not ready. Our mayor died. No one can do anything.” - Reuters

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