Japan Mulls Plan for One Operator to Run All [Nuclear] Reactors
Comment of the Day

October 23 2013

Commentary by David Fuller

Japan Mulls Plan for One Operator to Run All [Nuclear] Reactors

Here is the opening from this interesting Bloomberg article
Japan's government is discussing a radical overhaul of its nuclear power sector, the world's third largest, that would combine the nation's 50 operating reactors into a single company to rebuild an industry that's been effectively halted by the March 2011 Fukushima disaster.

The company would be owned by Japan's nine regional utilities, and two wholesalers Japan Atomic Power Co. and Electric Power Development Co. (9513), while the government and local reactor makers would give financial and technical support, Taku Yamamoto, who chairs the ruling Liberal Democratic Party's energy committee, said in an interview.

Part of the profit from sales of the new company's electricity would be funneled toward the cleanup of Tokyo Electric (9501)Power Co.'s wrecked Fukushima atomic station and victim compensation, which combined may cost more than 11 trillion yen ($112 billion). The plan would keep Tokyo Electric alive to shoulder Fukushima costs and avert any blackouts in Tokyo, the host of the 2020 Olympics.

"The plan is based on Tepco's profits covering Fukushima costs without taxpayers' money and to increase the government's role in the nuclear industry," said 61-year-old Yamamoto. "Who's going to like a bankruptcy of Tepco? The company has to go on working hard for the Fukushima disaster until it dies."

Setting up a comprehensive nuclear-management company should help Japan expand its exports of reactors and operation skills as domestic electricity demand slows, Yamamoto said.

Tsuyoshi Numajiri, a spokesman for Tokyo Electric which is also known as Tepco, declined to comment on lawmakers' discussions to spin off nuclear operations at utilities, saying such plans are subject to change.

David Fuller's view I was surprised to see this article because nuclear power has been a dead issue in Japan following the understandable public reaction to the Fukushima disaster in 2011. That will not easily or quickly change. Nevertheless, this plan may help and it sounds sensible.

Meanwhile, although I remain bullish about Japan's medium to longer-term recovery scope under Prime Minister Shinzo Abe's economic policies, my biggest concern has been its uncompetitive energy costs without nuclear power. If he can gain some public support for a reorganisation and then restart of Japan viable reactors which are not sitting on earthquake fault lines, and this would presumably not be easy, then Japan's energy situation would become more competitive.

I would welcome thoughts on this subject from any subscribers better positioned or informed to assess the situation.

Meanwhile, Japan's Nikkei 224 Stock Average (monthly historic, weekly & daily) is probably in the latter stages of this medium-term consolidation which looks like the first step above the base, as taught at The Chart Seminar. However, today's clear key day reversal signals that it is still encountering resistance just below the 15000 level, and a break in the progression of higher reaction lows, should this occur, would further delay medium-term upside scope.

Incidentally, there were plenty of downward dynamics in global markets today which is consistent with the short-term overbought condition that I discussed on Monday and Tuesday.

Watch for Japan's TSE2 Index (monthly historic, weekly & daily) to lead the eventual next upside move. Here also a break in the progression of higher reaction lows, with the most recent near 3270, would further delay upward scope.

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