Nuclear Shutdown Threatens Japan's Economy

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"Most-pessimistic scenario sees growth slashed by 1.6% in FY12/13."

Industrial Fuels and Power

Japan urgently needs new safety guidelines on nuclear power plants to avoid them being shut down completely by next April, which would see a 1.6% cut in economic growth, according to Kazumasa Iwata, president of the Japan Center of Economic Research.

"In the most pessimistic scenario, growth will be shaved by about 1.6% in fiscal 2012/13, with the effects still felt until fiscal 2020/21, when growth will be lowered by about 0.5%," Iwata told Reuters in an interview.

To avoid this from happening, the government must clear three conditions. Firstly, it must carry out a thorough investigation of how the nuclear crisis occurred and what new steps could prevent the same mistakes being made. In addition, globally acceptable safety standards must be established and an independent regulatory body that decides on reactor restarts must be set up.

"These steps should be taken by the end of the year. Japan is battling against time, but what the government is doing is putting priorities in the wrong order," said Iwata, a former deputy governor of the Bank of Japan. "Reactors that meet thorough safety standards should be restarted. Otherwise, one must question whether Japan's economy can be sustained," he said.

While he considers the country's policy of boosting energy self-sufficiency and cutting CO2 emissions through the use of nuclear power still valid, he said that the country must consider different options for its energy mix. Innovations in technology would allow large-scale production of solar panels and bring down this energy source's cost, he said. Moreover, other options are wind and geothermal power.

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