Japan Prepares for Reconstruction Costs of $310 Billion

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--Prime Minister Naoto Kan, Chief Cabinet Secretary Yukio Edano and other Japanese officials reverted from blue emergency jumpsuits to traditional business suits on Friday, April 1, signaling that the main priority of the government is now to rebuild Japan. Currently, reconstruction efforts could total more than $310 billion, making the magnitude 9.0 earthquake, along with other events related to March 11, one of the world's costliest natural disasters.

The ruling Democratic Party of Japan (DPJ), to which Kan and Edano belong, is drafting bills to support at least five years of reconstruction totaling approximately $24 billion. Some ruling and opposition party members are pushing to finance this through the use of government bonds. However, the government is hoping to encourage the private sector to shoulder most of the costs for reconstruction due to the potential for excess lending to jeopardize the bond market and cause the yen to bottom out. Adjusted tax policies could also involve the public directly in reconstruction as well.

Japan's government is also considering aiding those displaced by the earthquake, tsunami, and nuclear crisis beyond temporary housing and disaster relief. The government may rebuild homes of survivors and may provide compensation to individuals and enterprises affected.

Most domestic engineering and construction firms, including Shimizu Corporation (TYO:1803) (Tokyo), Taisei Corporation (TYO:1801) (Tokyo), Ohbayashi Corporation (TYO:1802) (Osaka, Japan) and Kajima Construction Corporation Limited (TYO:1812), have set up divisions that will deal directly with reconstruction efforts. As of March 28, Taisei has begun the removal of debris from residential, public and industrial areas. It is currently working to remove silt deposited by the tsunami at the Sendai refinery, which belongs to JX Nippon Oil and Energy Corporation (TYO:5001) (Tokyo), as well as other affected plants that are keen to restart. Shimizu and Ohbayashi also are doing more of the same.

Emergency budgeting for immediate rehabilitation, which is aimed at bringing infrastructure up to at least operational standards in order to facilitate disaster relief and transportation, could total $120 billion alone. It is not clear whether or not that figure is part of the $310 billion that is estimated for reconstruction.

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