Asia Programme
Meeting Summary
Governing Complex Energy
Systems: Challenges and
Strategies for Japan and the
UK
Alistair Buchanan
Partner, KPMG LLP
Yoichi Funabashi
Chairman, Rebuild Japan Initiative Foundation
Barak Kushner
Senior lecturer in modern Japanese history, Department of East Asian Studies, University of Cambridge
Kazuto Suzuki
Professor, Public Policy School, Hokkaido University
John Swenson-Wright
Head, Asia Programme, Chatham House
6 May 2015
The views expressed in this document are the sole responsibility of the speaker(s) and participants, and do not necessarily reflect the view of Chatham
House, its staff, associates or Council. Chatham House is independent and owes no allegiance to any government or to any political body. It does not
take institutional positions on policy issues. This document is issued on the understanding that if any extract is used, the author(s)/speaker(s) and
Chatham House should be credited, preferably with the date of the publication or details of the event. Where this document refers to or reports
statements made by speakers at an event, every effort has been made to provide a fair representation of their views and opinions. The published text of
speeches and presentations may differ from delivery.
10 St James’s Square, London SW1Y 4LE T +44 (0)20 7957 5700 F +44 (0)20 7957 5710
www.chathamhouse.org
Patron: Her Majesty The Queen Chairman: Stuart Popham QC Director: Dr Robin Niblett Charity Registration Number: 208223
2 Governing Complex Energy Systems: Challenges and Strategies for Japan and the UK
Introduction
This document is a summary of a panel discussion on the challenges and strategies facing the UK and
Japan in governing complex energy systems, which took place on 6 May 2015 at Chatham House.
The event was chaired by Barak Kushner, senior lecturer in modern Japanese history at the Department
of East Asian Studies, University of Cambridge. Speakers included Alistair Buchanan, Yoichi Funabashi,
Kazuto Suzuki and John Swenson-Wright.
The event was co-hosted by the Rebuild Japan Initiative Foundation (RJIF) and supported by the Daiwa
Anglo-Japanese Foundation.
The presentation was held on the record. The views expressed are those of the participants and do not
represent the views of Chatham House.
John Swenson-Wright:
Swenson-Wright opened the session by welcoming the speakers and audience. He emphasized that Japan
needs reforms in both foreign and domestic policy. There is a debate within Japan on the government’s
ability to cope with crises. This debate reflects both the after-effects of the 2011 Fukushima Daiichi
nuclear accident and the broader demographic, educational and foreign policy challenges facing the
country. At the same time, Prime Minister Shinzo Abe’s aspirations for Japan to take on a more active role
in the region (and beyond) continue to be contentious both in Japan and among its neighbours.
Barak Kushner:
Kushner highlighted three issues linking Japan’s ‘lost decades’ of economic stagnation.
First, Japanese officials are often aware of the problems the country faces – e.g. demography, the rise of
China, the changing nature of Japan’s role in the world – but are unable to respond effectively.
Second, changes and reforms are often developed and initiated, but the results are far from satisfactory.
Third, prior to the triple disaster of 3/11, Japan’s officialdom and society had convinced themselves that
Japan was sufficiently different, safe and removed from the world’s problems that it did not require the
safety and oversight mechanisms found in other countries. Considering itself apart from the international
status quo, Japan felt it did not have to follow the same rules.
The causes of Japan’s ‘lost decades’ may have been specific, but the problems arising from them are
similar to those facing Europe and other parts of the industrialized world, including the United Kingdom.
Therefore, there may be lessons to be learned from Japan’s experience.
Yoichi Funabashi:
Japan has missed a number of opportunities to establish nuclear energy safety regimes and practices over
the past 30 years. For the three decades leading up to 2011, nuclear safety was never seriously confronted.
3 Governing Complex Energy Systems: Challenges and Strategies for Japan and the UK
Contrary to claims that 3/11 was beyond human control, the recent RJIF report classifies the Fukushima
accident as man-made – caused by poor risk management, governance and leadership.1
In 1991, Japan’s Nuclear Safety Commission – the country’s nuclear watchdog – asserted that power
outages did not merit consideration as a nuclear threat. This conclusion was a product of the so-called
‘nuclear village’ consensus as much as of the Japanese ‘safety myth’ – the idea that nuclear energy could
be 100 per cent controlled.
The second missed opportunity came shortly after 9/11, when the Japanese Nuclear Industry Safety
Association (NISA) ignored advice from US authorities to strengthen measures against potential terrorist
attacks on nuclear plants. Neither did NISA share this warning with the utilities industry. Had NISA
seriously heeded it, many more fundamental measures could have been taken to increase Japan’s
resilience to potential incidents.
Thirdly, both TEPCO and Tohoku Electric Power were warned by their scientists and engineers of the
possibility of an earthquake and ensuing tsunami. However, whereas Tohoku Electric Power took ample
precautions, TEPCO’s top management’s paid scant attention to the warnings, resorting instead to tactics
of delay and deflection. When the tsunami struck, Tohoku Electric Power coped with the floods much
better than TEPCO did.
The failure of oversight, weak leadership and flawed management in the nuclear energy sector displayed
by the above episodes have been substantial elements in Japan’s ‘lost decades’.
Kazuto Suzuki:
When Japan began to modernize in the late 19th century, many engineers progressed to working in
government or the civil service. In the years after the Second World War, engineers became so dominant
in shaping Japan’s science and technology policy that Japanese began to speak of the ‘republic of
engineers’. In nuclear technology, engineers were equipped with nearly unlimited funding in order to
elevate the country’s nuclear sector to international standards. A group of experts from academia, the
nuclear industry and local government began to use these funds to promote nuclear energy; this group
soon became known as the ‘nuclear village’. In short, there was no adequate system of checks and
balances to monitor Japan’s nuclear industry.
Following the Second World War, the Japanese government began to promote nuclear energy as Japan’s
primary source of energy, despite widespread anti-nuclear sentiment among the country’s population in
the aftermath of the atomic bombings of Hiroshima and Nagasaki. Successive Japanese governments
focused on stabilizing and supporting the nuclear industry. In this context, the Japanese government, in
collaboration with the nuclear industry, propagated the idea that Japan’s nuclear facilities were absolutely
safe. The ‘nuclear village’ as the guardian of the ‘safety myth’ successfully convinced the public that
Japan’s regulations and oversight mechanisms were sufficient to ensure the country’s safety. Accidents
such as Chernobyl were dismissed as resulting from human error, or were deemed irrelevant to Japan on
the grounds that the country used different technology. Moreover, Japan’s nuclear industry generously
supported communities at the sites of the reactors, providing employment and developing local
economies.
1
See Yoichi Funabashi and Barak Kushner (eds), Examining Japan’s Lost Decades (London: Routledge, 2015).
4 Governing Complex Energy Systems: Challenges and Strategies for Japan and the UK
Although a great number of committees and agencies are tasked with the oversight of Japan’s nuclear
industry, there is a lack of clear chain-of-command responsibility. In the aftermath of the Fukushima
disaster, none of these institutions were willing to take responsibility. NISA, technically charged with the
first response to nuclear accidents, found it difficult to obtain information, since its local staff had
immediately evacuated the Fukushima Daiichi plant following the accident. Prime Minister Naoto Kan’s
visit to the Fukushima Daiichi plant on the day after the accident introduced additional confusion into the
management of the crisis.
To some extent, Fukushima weakened Japan’s ‘safety myth’. However, with Japan’s nuclear plants shut
down for the time being, local economies are struggling, exerting pressure on local governments to find
solutions. Demands to restart the plants have been accompanied by claims that Japan’s revised nuclear
regulations are the most stringent worldwide, and strong enough to prevent another Fukushima-like
disaster. Thus, Japan is running the danger of establishing a ‘safety myth 2.0’. In a similar vein, the
current focus on regulation is promoting new ties between government and engineers. There are signs
that a new ‘republic of engineers’ may be emerging, and with it possibly a new ‘nuclear village’ in which
self-reinforcing assumptions and/or captured interests prevent clear analysis.
Alistair Buchanan:
Japan is on the verge of liberalizing its energy sector, and thus is keen to learn from the UK’s experience
of liberalization over the past 25 years.
Liberalization of the UK energy market began in 1990. By 2002, its market was fully open to competition
for domestic customers. Throughout the period 1990–2002, the UK used its own gas, and had very few
electricity connections to mainland Europe. Rather than liberalizing with a big bang, the UK skilfully
initiated a process of transition, introducing competition step by step. The first lesson when opening a
market is to approach the process of transition as an opportunity to educate stakeholders and to introduce
a new way of working.
The UK’s energy networks have been very successful. Arguably, the transitions in energy generation,
power stations and retail supply went less well. In 2002 the UK had open markets, but since then it has
opted for managed markets. In the energy generation market of the early 2000s, the UK effectively held a
reserve margin of 15–20 per cent. Today, the margin is approximately 2 per cent, first and foremost due
to political interventions motivated by the need to address climate change, social and security issues. The
lesson is that under a system of open markets, political interventions can have serious adverse
consequences. Consequentially, the UK has opted for a managed market.
With regard to the retail sector, in 2002 the markets opened up amid falling prices for coal and gas.
However, due to a variety of factors prices subsequently increased, upsetting consumers. Politicians
consequently felt compelled to act, and this created a very difficult situation.
There are a number of recommendations for Japan:



Japan should set aside funds to invest in smart grids, and provide incentives to network
companies to do the same.
Japan should avoid creating an unrealistic narrative of liberalization equalling ever-lower prices.
Japan must ensure that it understands the limitations of competition, in particular with regard to
selling a product.
5 Governing Complex Energy Systems: Challenges and Strategies for Japan and the UK


Energy is too fundamental a product to separate market developments from political concerns
and mechanisms.
Japan may wish to break down its ‘republic of engineers’, but it should retain a solid base of
engineering graduates.
John Swenson-Wright:
The 3/11 disaster created a national identity crisis in Japan. Prime Minister Abe’s claim that Japan has
become a ‘more normal nation’ may hold true with regard to foreign policy, but not in terms of domestic
policy. This ambiguity is reflected in the polarized debate over the Fukushima disaster and Japan’s
response to it.
This debate, amounting perhaps to a re-engagement of the Japanese public with politics, is one of the
positive outcomes of 3/11. It is quite striking in view of the apparent lack of engagement at the national
electoral level, in particular during the 2014 parliamentary elections. However, whether or not 3/11 will
create a new sense of political participation at the local level will depend not only on public engagement,
but on Japan’s ability to renew its institutions of governance to reflect an increasingly complex set of
policy choices.
Given Japan’s ‘nuclear allergy’ after Hiroshima and Nagasaki, it is surprising how long it took Japan to
engage with the issue – successive Japanese administrations have sought to develop nuclear energy since
the 1950s. The desire to develop nuclear energy was driven not only by resource scarcity, but also by a
sense of vulnerability. The focus on nuclear energy has been costly for Japan, though: in the period 1970–
2007, Japan spent an estimated ¥10 trillion [about US$80 billion at prevailing exchange rates] on
developing nuclear energy.
Despite popular opposition to nuclear energy and the questionable safety record of Japan’s regulatory
bodies, the government decisively pushed for nuclear energy, countering a grassroots anti-nuclear
movement through advertising, the creation of the ‘nuclear village’ and massive subsidies to affected
communities. In addition, regulators and promoters of nuclear energy were all housed in the Ministry of
Economy, Trade and Industry (METI). Only months before 3/11, METI officials were planning to
substantially increase the share of nuclear power in Japan’s energy mix. The public reaction was
predominantly negative across the political spectrum, blaming the ‘nuclear village’ and vested interests,
and criticizing the administration for providing insufficient information on the dangers of a nuclear crisis.
Others criticized the country’s academics, who are perceived to have been financially co-opted by the
nuclear industry, and the practice of placing bureaucrats in the very industries which they were previously
charged with overseeing.
Arguments advanced by the nuclear industry to defend itself have been mostly unconvincing. In fact, the
most interesting part of the debate goes beyond energy sources, questioning whether the ideal of rapid
economic growth is the right paradigm for Japan and suggesting the country turn to a more
communitarian form of living.
Perhaps the most important development has been the discussion about local governance, and how local
governments have responded to the crisis. There is a willingness to create new structures and agreements,
which has led to a discussion on the possibility of expanding local government to larger, state-based units,
or alternatively to shrinking local government to a smaller level, in order to maximize local expertise.
Whether these suggestions are feasible is subject to debate, but they demonstrate an increased willingness
6 Governing Complex Energy Systems: Challenges and Strategies for Japan and the UK
to engage with the question of how best to structure national government. This may be a positive
externality of 3/11 and the ensuing crisis.
Looking forward, a number of questions need to be addressed:



Can technological changes in the new regulatory framework guarantee that there will not be
another 3/11?
How have changes in public attitudes affected the discourse on representative government?
How much trust is there in national government, both with regard to energy governance and
more broadly? How legitimate are Japan’s representatives, and are they willing to create a
genuinely transparent regulatory framework?
Barak Kushner:
Though Japan on the surface appears to be functioning well, Fukushima is an ongoing problem.
Moreover, many of the country’s problems have a substantial impact on its citizens. The prevailing
sentiment in northeastern Japan is pessimism, and many believe that nothing has changed.
Question 1: Does the positive example of the Tohoku Onagawa nuclear plant not
suggest that the ‘nuclear village’ is not the unitary actor that critics claim it to be?
Yoichi Funabashi:
The term ‘nuclear village’ does not necessarily imply a monolithic entity. However, regulatory agencies do
not have sufficient status to dictate their terms. Although they offer recommendations and advice, they
have never been able to ensure that safety regulations are seriously enforced. The ‘nuclear village’
atmosphere remains. This is a cultural problem.
Question 2: Are hopes that liberalization – through the ‘unbundling’ of energy
companies – will increase transparency and accountability justified?
Alistair Buchanan:
Liberalization in Japan is indeed likely to lead to energy companies ‘unbundling’, and thus to greater
transparency and accountability towards customers. However, this process will require a change of
culture, which will pose a challenge to energy companies. It is very important that liberalization is
approached as a process, and conducted as a transition rather than in a single sweep.
Yoichi Funabashi:
One of the lessons of Fukushima was the crucial importance of guarding the independence of regulatory
and oversight institutions. The Nuclear Regulation Authority (NRA) was established in 2012, and has
been much more independent than its predecessor. It has also made clear its policy of introducing a
constant feedback loop to monitor and improve safety practices, including through new technology. The
‘nuclear village’ used to be suspicious of new safety technology, because this contradicted the myth of
perfect safety.
7 Governing Complex Energy Systems: Challenges and Strategies for Japan and the UK
Question 5: It could be argued that TEPCO’s poor risk management resulted from
the company’s position within Japan’s oligopolistic energy market. Is this
structure still appropriate, or should the country engage in liberalization?
Kazuto Suzuki:
Liberalization by definition means less regulation, and less control over operators. From this point of
view, a regional monopoly is preferable, since it facilitates regulation. However, many people believe that
the electricity companies’ monopoly underpins the ‘nuclear village’ model, and that this is why the
monopoly has come under scrutiny. A more competitive and diverse market may encourage a more
effective regulatory framework.
Question 6: To what extent was the miscommunication that occurred between
governmental institutions and the bureaucracy a result of the latter having to
adjust to the Democratic Party of Japan (DPJ) being in office, as well as to the
DPJ’s inexperience?
Kazuto Suzuki:
Tensions between the DPJ government and the bureaucracy may have been a negative factor. However,
the government fared relatively well in its response to the tsunami, and very well in coordinating the
immediate reconstruction and rescue planning. This suggests that despite potential tensions, problems in
Japan’s response to the nuclear disaster cannot be blamed solely on the DPJ.
Yoichi Funabashi:
The Liberal Democratic Party (LDP) government’s response to the 1995 Kobe earthquake was very poor.
The DPJ, in contrast, immediately mobilized the Japanese Self-Defence Forces, which were of enormous
help despite the challenges they faced. Perhaps there were tensions between the DPJ leadership and
TEPCO’s top management. However, had the LDP been in power, the population almost certainly would
have perceived collusion between the government and TEPCO as having exacerbated the crisis. Instead,
3/11 revealed Japan’s profound issues with regard to governance, leadership and crisis management.
There are Japanese intellectuals who have compared the breakdown of leadership in the wake of
Fukushima to the days preceding the Pacific War.
John Swenson-Wright:
Japan’s crisis of governance is partially due to excessive centralization of political power. To improve its
crisis management at both the local and national level, Japan must move away from its hierarchy of
power, which privileges the centre, and must recognize the need for a much more diverse range of
representatives.