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Japanese Government Looks at Tax Hikes to Pay for Nuclear Disaster

Japanese Government Looks at Tax Hikes to Pay for Nuclear Disaster

Japanese consumers would be on the hook for nuclear damage payments and earthquake reconstruction costs under two tax plans the government is considering, officials said Tuesday.

The Kyodo News agency said one plan would raise electricity customers’ charges to help cover claims against Tokyo Electric Power Co. from people who suffer losses from the crisis at the Fukushima Dai-ichi nuclear power plant. The increase would come in the form of a higher electricity source-development tax, which is collected from customers as part of their electricity bills.

TEPCO must pay people forced to evacuate from the region surrounding the nuclear plant, but officials said the power company may not be able to pay all the claims.

“While TEPCO will be primarily responsible for damages payments, the government may have to support the firm,” Economy, Trade and Industry Minister Banri Kaieda told a press conference Tuesday. “We are considering taxation, the electricity charge and other measures to enable the government to shoulder some of the burden.”

A second plan would raise to 8 percent Japan’s current 5 percent consumption tax for about three years, Kyodo said. The extra $273 billion ($22.5 trillion yen) would pay for reconstruction of the country’s northeastern region, said senior lawmakers in the Democratic Pary of Japan.

The March 11 earthquake and ensuing tsunami caused about $300 billion in damage, experts have estimated.

Japan’s exports fell in March at a faster pace than economists expected, in a sign that shipments will continue to weaken and hurt economic growth after last month’s twin disaster.

The data announced Wednesday suggest Tokyo’s trade balance will swing to a deficit as some companies grapple with a shortage of electricity and needed parts.

Japan’s economy is likely to contract in the second quarter and then resume growing in the third quarter as efforts to rebuild the northeast take hold. But damage to supply chains and factory output could linger, depriving the export-focused country of a vital contribution to gross domestic product and setting the stage for further easing by the central bank.

“As supply chains are expected to recover in late May, the drop in exports may prove short-lived,” said Yuichi Kodama, economist at Meiji Yasuda Life Insurance.

“But due to power supply constraints expected in the summer, a full pickup in exports is unlikely until at least the end of this year. The Bank of Japan is likely to be prompted to ease its policy further in coming months.”

Exports fell 2.2 percent in March from a year earlier, more than a median forecast for a 1.5 percent annual fall. That marked the first decline in 16 months. Imports rose 11.9 percent from a year earlier against a forecast for a 6.0 percent annual rise, trade data issued by the Finance Ministry showed.

Exports dropped 7.7 percent from February on a seasonally-adjusted basis.

The quake disaster left 27,000 people dead or missing, made tens of thousands homeless and damaged the TEPCO nuclear power plant in Fukushima, leading to widespread evacuations. About 135,000 people are living in nearly 2,500 shelters set up in schools, gymnasiums and community centers along the northeast coast, while the government races to build temporary homes and prepare public housing units for them, a process expected to take five months.

Internal Affairs Minister Yoshiro Katayama told reporters it had been clear even before the disaster that “some sort of reform of spending and revenues was necessary. The debate over the fiscal situation is not something that began with this disaster.”

The government hopes to avoid issuing new bonds to fund an initial emergency budget, expected to be about $48 billion (4 trillion yen), due to be compiled this month.

But bond issuance is likely for subsequent extra budgets, which will only make it harder for Japan to rein in its debt, already running at twice the size of the $5 trillion economy.

Katsuya Okada, secretary-general of the ruling Democratic Party (DPJ), said on Sunday taxes had to rise to repay new government bonds that will be needed to pay for reconstruction.

A poll by the Nikkei business daily showed about 70 percent of Japanese voters would support a tax hike, but want unpopular Prime Minister Naoto Kan to be replaced.

The Yomiuri newspaper reported that the government had ruled out raising income and corporate taxes.

Nuclear plant progress
The tax ideas were floated as TEPCO took a significant step toward easing the nuclear plant crisis by pumping highly radioactive water from the basement of one of its buildings to a makeshift storage area.

Removing the 25,000 metric tons (about 6.6 million gallons) of contaminated water in the basement of a turbine building at reactor No. 2 of the Fukushima Dai-ichi plant will help allow accessfor workers trying to restore vital cooling systems that were knocked out in the March 11 tsunami.

It is but one of many steps in a lengthy process to resolve the crisis. TEPCO projected in a road map released over the weekend that it would take up to nine months to reach a cold shutdown of the plant. But government officials acknowledge that setbacks could slow the timeline.

The water will be removed in stages, with the first third of it to be handled over the coming 20 days, said Hidehiko Nishiyama of Japan’s Nuclear and Industrial Safety Agency. In all, there are 70,000 tons (about 18.5 million gallons) of contaminated water to be removed from the plant’s reactor and turbine buildings and nearby trenches, and the entire process could take months.

TEPCO is bringing the water to a storage building that was flooded during the tsunami with lightly contaminated water that was later pumped into the ocean to



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