Boston, MA -- (SBWIRE) -- 07/31/2012 -- BMI View: At the time of writing the energy and macroeconomic dilemmas facing Japan are getting starker each day, with public opinion over nuclear power remaining hostile, despite the country's fuel import costs soaring as nuclear generation dwindles to become non-existent. Compelling macroeconomic arguments dictate that the country speeds up the process of safety checks put in place after March 2011's Fukushima disaster; however, it remains to be seen whether the Japanese government is prepared to take the political heat from restarting nuclear plants. BMI believes that pressures from the industry and economic concerns will prevail. However, we expect that it will take a while longer for any nuclear plant to resume generating, with the crisis and the damage inflicted on Japan likely to drag on for at least part of 2012's summer.
Following the Great East Japan Earthquake and the tragic accident at the Fukushima Daiichi plant in 2011, BMI had anticipated two things: that Japan's industrial activity and economic performance would contain electricity demand; and that the loss of a substantial share of nuclear generation would force Japan to increasingly rely on costly imports of LNG and oil. Data from the Federation of Electric Power Companies of Japan (FEPC) and Japan National Statistical Agency fully confirm these views. BMI also highlights that the negative sentiment towards nuclear power generation is unlikely to improve in the near term, which is a view confirmed by developments:
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- Since 2011's Fukushima Daiichi accident, all of Japan's nuclear reactors have been undergoing two-phase stress tests to determine whether the plants can withstand large earthquakes and tsunamis. So far, the process of safety checks put in place after Fukushima has been progressing painfully slowly, with only two reactors having completed first-stage stress tests, and none having been submitted for the second-stage test. With public opinion polarised and with the government's attempting to gain local backing, it appears that Japan could have no nuclear power for the first time in more than 40 years.
- The likelihood of a power crunch in summer 2012 remains thus elevated. That said, we expect that economic considerations will prevail, with nuclear expected to come back online in Q312.
- As nuclear generation dwindles, thermal sources are thus expected to continue to play a cardinal role in supporting the country's power industry, with a spike in LNG and oil imports suggesting that these two fuels will continue to be the sources of choice to fill the gap in the short term. In the medium to long term, gas is, however, expected to fire the lion's share of required generation.
- In addition, Japan appears poised to support a long-term turn towards increasing renewables. We note, however, that policy creation for the renewables space will be crucial.
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