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Oct. 21 (Bloomberg) -- Kazutaka Kikawada ran track and field at Fukushima’s Yamafunyu Elementary School before becoming the local boy made good, attending the elite University of Tokyo and carving out a career that made him president of Tokyo Electric Power Co.
The school ground where he ran his races a century ago now has a yellow backhoe digging out topsoil irradiated by the wrecked nuclear reactors Kikawada approved for construction 60 kilometers (38 miles) away. The dirt is piled under sky-blue tarpaulins. Graffiti in red and black kanji on the main road demands Tokyo Electric remove its “radioactive trash.”
“I reckon he brought the nuclear plant to his home prefecture to create jobs and prosperity,” said Chozo Yamaki, an 83-year-old who knew Kikawada and still lives and farms cucumbers on a patch of land across the street from where the schoolboy runner grew up in the farming hamlet. “It’s tragic it led to such a crisis.”
Little remembered after his death more than three decades ago, Kikawada made what he called a “deal with the devil” to take the utility known as Tepco into nuclear power. That decision provided energy to Toyota Motor Corp., Sony Corp. and the other companies that built Japan from the devastation of World War II into the world’s second-largest economy. The Fukushima disaster came 66 years after the atomic destruction of Hiroshima and Nagasaki and may mark a turning point in Japan’s future as fundamental as the bombs that ended the war.
Japan’s experience as the only country to be attacked with atomic weapons made its embrace of nuclear power as unlikely as its rapid economic recovery. Yet Kikawada wasn’t the only businessman to conclude that the atomic “devil” could make that growth possible.
From 1945, Japan based its economic recovery on rebuilding its power industry, initially with oil and coal and later with a so-called nuclear village. The term describes a nuclear- industrial complex comprising utilities and manufacturers supported by politicians, bureaucrats and academics that promoted atomic energy to power fast-expanding industries in steel, shipbuilding, cars and electronics.
“The nuclear village’s core argument is that it offers low-cost, reliable power essential for a modern and competitive economy,” Andrew DeWit, a professor of the politics of public finance at Tokyo’s Rikkyo University, said in an interview. “But those claims are rapidly losing credibility in the public debate because after Fukushima the cost of nuclear power has become greater. The nuclear village is unraveling.”
Japan’s development into the world’s third-biggest user of nuclear energy dates from the last days of the war. Yasuhiro Nakasone, who would later become Prime Minister and a powerful advocate of atomic energy, was serving as a naval officer in Japan when Hiroshima was bombed. After the war, he began the work of persuading the U.S. to sell Japan nuclear technology.
“I strongly felt that Japan should rebuild itself with science and technology,” Nakasone wrote in his autobiography in 2004. “Japan needed to move with the times or we would be left behind immediately.”
Despite the stigma attached to anything nuclear in Japan, there were forceful arguments to pursue it for energy supply and security.
U.S. fire bombings before Hiroshima and Nagasaki were concentrated in urban areas and destroyed thermal generators, grids and transformers, leaving hydropower plants in rural areas as the main source of energy.
Meanwhile, electricity demand more than doubled to 33.9 billion kilowatt hours from 16.4 billion kilowatt hours in the five years from 1945 as Japan’s reconstruction took off.
Japan’s interest coincided with U.S. concern about what to do with its own surplus of weapons-grade plutonium, and the suspicion that created in the Soviet Union, Laura E. Hein wrote in “Fueling Growth -- The Energy Revolution and Economic Policy in Postwar Japan.”
U.S. President Dwight Eisenhower’s solution was the “Atoms for Peace” program to use U.S. plutonium to provide nuclear fuel for its allies.
The plan had the advantage of making allies dependent on technology from corporate giants General Electric Co. and Westinghouse, according to Michael Donnelly, a professor of political science at the University of Toronto who studies Japan’s nuclear program.
“I can’t believe that any decision of this sort would not involve consideration that nuclear energy programs would benefit American manufacturers,” Donnelly said in a phone interview.
Still, officials in both the U.S. and Japan had to work on persuading the public that nuclear technology could have a civilian use. Nuclear supporters in Japan were helped by the U.S. Central Intelligence Agency, says Tetsuo Arima, a professor of media studies at Tokyo’s Waseda University who studied declassified documents on postwar relations between the two countries in the U.S. National Archives and Records Administration to establish the link.
Among the CIA’s Japanese allies in the propaganda effort was Matsutaro Shoriki, owner of the Yomiuri newspaper and Nippon Television, Japan’s first commercial TV station. The newspaper - - now the world’s biggest with 10 million copies published daily -- wrote a series of pro-nuclear articles from Jan. 1954 viewed by the U.S. government as a success, according to the book “Nuclear Power, Shoriki and the CIA,” written by Arima and published in 2008.
The Walt Disney Co. was also roped into the effort. The 1957 cartoon “Our Friend, The Atom,” released as part of the company’s Tomorrowland project and depicting the positive benefits of a world harnessing atomic energy, was run on Shoriki’s TV channel, Arima wrote.
The Yomiuri newspaper declined to comment on Arima’s book when contacted by Bloomberg. Arima also declined to comment on whether the newspaper had responded to his book.
In 1954, Nakasone submitted a bill to parliament to finance nuclear energy research. Lawmakers set the budget at 235 million yen after uranium 235, a fuel used in atomic reactors, according to his autobiography. In 1955, the U.S.-Japan Atomic Energy Agreement gave Japan the right to buy nuclear fuel and technology from the U.S.
By September 1956, Shoriki, who was then head of Japan’s Atomic Energy Commission, announced the country’s long-term plan for nuclear power, included importing reactors before developing its own. The Tokai station, the country’s first, was built by government-backed Japan Atomic Power Co. in the 1960s in Ibaraki prefecture, northeast of Tokyo.
It was into this environment of government-led nuclear development that Kikawada stepped when he became president of Tepco in 1961. The company had begun research into atomic energy and was already looking for potential sites for a reactor in the late 1950s, according to its official history.
“It was inevitable that we would rely more on nuclear for future power supply as nuclear fuel needs less foreign currency than oil,” the official history said.
It was a period of rapid economic expansion in Japan and employees at the country’s power utilities were under intense pressure to feed the growth.
The demands on Kikawada were so extreme that when his mother, Nusa, died in 1950, he arrived in the middle of the ceremony, kept his taxi waiting outside and left after five or 10 minutes, Yamaki, his neighbor in Yamafunyu, said.
“That was the last time I met him,” Yamaki said. “I dug Nusa’s grave.”
Fukushima prefecture began working to attract a utility to build a nuclear plant in the region in 1958, according to Tepco. Shortly after Kikawada took over, the towns of Okuma and Futaba agreed to host a nuclear station.
Kikawada, who appears balding in spectacles wearing a western-style suit and tie in black and white photos, still had a decision to make.
“Kikawada once said that building a nuclear plant is like doing a deal with the devil,” Soichiro Tahara, author of “Documentary, Tokyo Electric,” said in an interview in August. He changed his mind in part because he didn’t want the government to control atomic energy after it had led Japan into a disastrous war, Tahara said.
“If Kikawada had decided to go against nuclear power, the government would have taken it over,” he said.
Based on his own writings and commentaries by others, Kikawada cuts a complex figure. In his autobiography, he credits Eijiro Kawai, his lecturer in economics and the humanities at the University of Tokyo, for instilling in him “social values.”
Kawai was arrested by Japanese authorities and imprisoned during World War II for his writings calling for a more even distribution of the country’s wealth.
Yet as head of Japan’s largest utility, Kikawada was also a pragmatist. With few sources of its own outside coal and hydropower, energy security had long been an obsession among Japanese leaders. The U.S. imposition of an oil embargo on Japan in 1941 led to its decision to attack Pearl Harbor the same year.
“From its expansionist role in World War II to its activist industrial policies of the 1970s and 1980s, energy security has played an important -- and sometimes overriding -- role in Japanese foreign and domestic policy,” according to a report in 2000 by the James A. Baker III Institute for Public Policy at Rice University.
“Kikawada was a unique business leader, combining capitalism with a social consciousness,” recalls Teruaki Masumoto, a former Tepco vice president who joined the company in 1962 and served under Kikawada. “Japan had no energy resources of its own and he saw Tepco’s role as one of enabling economic development.”
Under his 10-year watch, Tokyo Electric grew to be the world’s largest private utility, according to “The Nuclear Barons” by Peter Pringle and James Spigelman, which documents the growth of the global nuclear power industry. That made him a key figure in Japan’s search for energy to allow manufacturers like Toyota, Sony and Hitachi Ltd. to run their factories and turn out the products that made them global brand names.
Kikawada did give the go-ahead for the Fukushima Dai-Ichi plant on the east coast of Japan and construction began in 1967. The design included a village with a church and elementary school for the families of engineers from General Electric who remained until 1979, according to Tepco’s official history.
It was the beginning of a golden era in Japan’s nuclear power industry. The Atomic Energy Commission in April 1967 unveiled a nuclear plan entailing expansion of power generation capacity to as much as 40,000 megawatts by 1985, including the development of overseas uranium mines.
By 2009 Japan had 54 nuclear reactors generating about 30 percent of the country’s electricity. Before the crisis in March, there were plans for 14 more and a target to generate 53 percent of the country’s power from nuclear plants by 2030.
This rapid development helped spawn Japan’s nuclear village. Nuclear-related spending by Japan’s utilities was 2.14 trillion yen ($28 billion) in the year ended March 2010, when 45,382 people were directly employed by the industry, according to the Japan Atomic Industrial Forum.
The nuclear industry also employs tens of thousands of subcontractors and other support services. When the earthquake hit the Fukushima Dai-Ichi station on March 11, Tepco had 6,415 people at the site, including 5,500 subcontractors.
Economic trends in the 1970s, when most plants were built helped persuade local communities to accept nuclear plants so soon after Hiroshima and Nagasaki, says Daniel Aldrich, an Associate Professor of Political Science at Purdue University and author of “Site Fights: Divisive Facilities and Civil Society in Japan and the West.”
The period saw rapid depopulation of rural areas as more people sought higher-paid jobs in cities including Osaka and Tokyo, even as the government increased subsidies and benefits to farmers to retain levels of food production and the continuation of rural life.
“In a lot of villages, the nuclear industry was viewed as a lifeline,” Aldrich said in an interview. “Living in Tokyo, people could afford to debate issues related to nuclear power and the risk of radiation. But for people in declining rural areas, these plants were often seen as the last hope to attract investment and growth.”
Another reason was pollution, according to Tahara, the author on Tepco. In the 1950s, the so-called Minamata disease led to the deaths of more than 1,500 people after mercury from a factory contaminated seafood in Minamata Bay, raising a public outcry over the health risks from Japan’s industrial development. The utilities shifted their slogan to “stable clean energy” from “cheap energy” as they sought approval for nuclear plants, he said.
Kikawada told Time Magazine in 1971, the year Dai-Ichi began commercial operations and he became Tepco chairman, that Japan’s growth had created environmental devastation and risked causing social disruption. Pollution protesters staged sit-ins in government offices, the magazine reported at the time.
The proliferation of nuclear power plants in rural areas around Japan’s coastline also created what’s known as the donut effect, where villages and towns surrounding stations enjoyed a prosperity not available to those further away, gaining jobs, public works projects and a higher standard of living.
Fukui prefecture, nicknamed the Nuclear Ginza for its 13 nuclear reactors -- the highest concentration in the world -- boasts the nation’s heaviest newborns, biggest houses and most emergency clinics per person. The building of a plant in Ohi saved the town from bankruptcy in the 1970s, built a bridge to connect the Ohi peninsula with the main coastline, created 2,400 jobs and provided capital for a tourism industry, according to Mayor Shinobu Tokioka.
Omaezaki, southwest of Tokyo, has received a total 26 billion yen in government grants for the five reactors built at Chubu Electric Power Co.’s Hamaoka plant. That money paved new roads, upgraded phone lines and funded programs to help the area attract businesses, in addition to building an elementary school, a hospital, three preschools, a public pool, a gym and a library.
Kikawada said he was motivated by the idea of helping rural areas, writing in the Nikkei newspaper in 1970 that Dai-Ichi would “contribute to the development of the region.”
Not everybody agreed. About 34 towns and cities in Japan have rejected nuclear plants since 1961 as opposition grew, according to the Citizens’ Nuclear Information Center, a Tokyo- based group.
Still, the impact of the utilities’ investment in nuclear power on Japan’s broader economy is hard to ignore. The rise of Japan’s manufacturers to dominate the global auto and electronics industries came in lockstep with the promotion of nuclear energy. Power lines from Fukui’s Nuclear Ginza feed the industrial heartland of Kansai, an area the size of Belgium where Sharp Corp. and Panasonic Corp. have factories, and where Toshiba Corp. makes the Nand flash chips used in the iPad.
Coupling Japan’s industrial development with atomic power produced an economic model with the nuclear plant at its center driving growth, according to Shinichiro Tonooka, a professor at Tsuruga College in Fukui.
“The overwhelming majority of residents are benefiting economically from the station even if they’re not directly involved in engineering projects,” Tonooka said.
Yet decisions made by utilities in this era were also laying the groundwork for the catastrophe that engulfed Fukushima about 40 years later.
Before beginning construction at the Dai-Ichi site, Tepco lowered the cliff level by 25 meters (82 feet) from its 35 meter original height, spokesman Naoki Tsunoda said in a phone interview. According to the Tepco’s application for planning permission, the reactor buildings were built on bedrock 10 meters above sea level. That made it easier to bring equipment to the site by sea, but the effect was to lower the cliff below the level of the tsunami that struck the plant in March.
The industry also dismissed warnings based on advances in seismology since the 1960s and 1970s when many of Japan’s atomic plants were built, said Katsuhiko Ishibashi, a seismologist and former professor in the Research Center for Urban Safety and Security at Kobe University.
While Tepco had called the 13.1-meter tsunami that hit Dai- Ichi “unforeseeable,” geological research in the last decade suggests otherwise. A team of geologists led by Koji Minoura at Tohoku University found evidence in rock strata that the area had been hit by three giant tsunamis over 3,000 years.
Japan’s decline since the bubble economy collapsed in 1990 reduced energy spending, causing utilities to try to cut costs by scrimping on safety measures, according to Muneo Morokuzu, a professor of energy, environment and public policy, at the University of Tokyo who previously worked for Toshiba Corp. as an engineer.
“The country that most needed nuclear generation to offset its lack of domestic natural resources made a big mistake in the last 20 years,” Morokuzu said in an interview. “A lack of decisive measures to revitalize the economy prompted utilities to shift their focus more to their balance sheets.”
Tepco in 2002 admitted it had falsified maintenance reports at nuclear plants for more than two decades. Chairman Hiroshi Araki and President Nobuya Minami resigned to take responsibility.
In 2007, the utility said it hadn’t come entirely clean five years earlier and admitted to concealing at least six emergency stoppages at Dai-Ichi and a “critical” reaction at the plant’s No. 3 unit that lasted seven hours.
Kansai Electric, Chubu Electric Power Co., Tohoku Electric Power Co. and Hokuriku Electric Power Co. have also said they faked safety records.
“Accidents, mishaps, lies, duplicities -- the postwar landscape of Japan’s nuclear power development is filled with fiascoes,” the University of Toronto’s Donnelly said.
Amid the accidents and fake safety reports, the underlying premise that resource-poor Japan had to rely on nuclear power was rarely questioned by the government, industry or the country’s bureaucrats.
That changed after March 11 and the evacuation of almost 160,000 people from around the site of the world’s worst nuclear accident in 25 years.
Former Prime Minister Naoto Kan requested the shutdown of Chubu Electric’s Hamaoka plant citing earthquake risk, sparking a debate over the suitability of nuclear energy in quake-prone Japan and putting him on a collision course with the nuclear village. The conflict was exacerbated when Kan ordered other plants to remain closed until safety could be assured.
More than 80 percent of Japan’s 54 reactors remain off- line, with more shutting for scheduled maintenance in the months ahead.
“If Japan’s nuclear power regime is cracking now it’s cracking for the first time since 1955,” Donnelly said.
The majority of opinion surveys show Japan’s public now opposes nuclear power. Sixty percent of respondents to a Mainichi newspaper poll published on Sept. 20 said they favor phasing out atomic energy.
Nuclear power was a key policy of the Liberal Democratic Party, which governed Japan with almost no interruption for 55 years until 2009. Close ties with the government meant opposition was confined to left-wing parties and the rural towns where utilities tried and failed to build plants.
“The nuclear industry is a very Japanese bureaucracy in nature, similar to the Japanese army during World War II,” said Tetsunari Iida, executive director at the Tokyo-based Institute for Sustainable Energy Policies and a former nuclear industry official. “They don’t listen to anybody.”
Fukushima has ruptured the usual consensus within Japanese industry.
Manufacturers have balked at what they assume will be rising energy prices and shortages. LCD-maker Sharp and Mitsui Mining & Smelting Co., Japan’s biggest zinc smelter, said they plan to move some production abroad because of the unreliable energy supply at home.
Some economists share their concern. Gross domestic product will fall by 3.6 percent and 200,000 jobs may be eliminated if all of Japan’s reactors close by next spring, the Tokyo-based Institute of Energy Economics said in a July report.
The Fukushima disaster has spawned two competing visions among businesses about the future of Japan’s energy policy. The first, espoused by the utilities and some manufacturers, says nuclear power is essential for the economy.
“The prefecture of Fukui provides 55 percent of the electricity for the 20 million people of the Kansai area,” the prefecture’s governor Issei Nishikawa said in an interview. “Shutting off all of this power would create a different set of risks, such as sparking social unrest.”
Holders of an alternative view, including Softbank Corp. Chief Executive Officer Masayoshi Son, say the utilities should lose their monopoly over power generation and power distribution to make way for new companies in solar, wind and geothermal.
It’s a view that is appealing to technology and service companies more than manufacturers. Hiroshi Mikitani, president of Japan’s biggest online retailer Rakuten Inc., quit Keidanren, the country’s largest business lobby, in protest over what he said is the group’s support for the status quo.
Promoters of renewable energy received a boost under Kan, who pushed through a bill to introduce a feed-in tariff to subsidize renewable energy producers. The measure will also force utilities to purchase renewable energy from providers at a fixed price.
“Japan originally had the most advanced technology in renewable energy but other countries got ahead of us because Japan lacked a legal framework for renewable energy and domestic demand withered,” Son said in September. “Now that we have a law in place, Japan will have to catch up.”
The renewable energy lobby faces a massive task to overcome political support for the utilities even as public opinion turns against atomic power, according to Taro Kono, a politician with the opposition Liberal Democratic Party and a critic of what he calls Japan’s nuclear obsession.
Less than six months after the disaster, the nuclear village was already pushing back. After calling for Japan to abandon atomic power, Kan said criticism from power companies, regulators and politicians that support the industry contributed to the pressure on him to step down in August.
Kan’s successor Yoshihiko Noda softened the government’s stance, telling the public that idled reactors are needed to save the country’s ailing economy. “It’s important for us to prepare for restarts,” he said in comments on possible power shortages next year.
Power companies are also facing higher costs from importing fossil fuels to replace lost nuclear generation capacity, said Penn Bowers, a utility analyst with CLSA Asia-Pacific Markets in Tokyo.
“The utilities certainly can’t meet demand next summer,” Bowers said at a Bloomberg conference on Japan’s recovery earlier this week. “The public hasn’t felt the rising costs yet, but the utilities are taking it on the chin.”
What the government decides to do with Tepco may be the first indicator of the direction of its new energy policy, expected to be completed next year.
Shigeaki Koga, a former official at Japan’s Ministry of Economy, Trade and Industry, which promotes the nuclear industry, called for Tepco to be placed into bankruptcy and its power generation business separated from its transmission operations.
“The response to the disaster was botched because Tepco exerts vast influence on politicians, government ministries, the business world, the media and the academic community,” Koga said in a memo published in May. Koga was forced to resign last month after publishing his proposals.
The government won’t allow the utility to go bankrupt because creditors and stockholders would get paid off before people suffering from the nuclear accident, Minister of Trade, Economy and Industry Yukio Edano said.
“If we drive Tepco into bankruptcy, victims’ claims for damages from the nuclear accident wouldn’t be met,” Edano said in an interview on Sept. 15.
A more critical issue facing the industry is that utilities are unlikely to be able to build any more plants, says Tahara, author of the book on Tepco’s history.
“The crisis has made people question nuclear power for the first time since the end of the war,” he said. “Japan won’t be able to build new nuclear reactors in the next decade or two.”
The Fukushima crisis has changed the concept of the nuclear community. Utilities need approval from towns within about 4 kilometers of a planned nuclear plant. The contamination around Fukushima spread further and that means operators will find it impossible to get support from a larger number of towns and residents, Tahara said.
That rings true in Yamafunyu, the childhood home of Tepco’s Kikawada, where his “deal with the devil” ultimately rained radiation upon his elementary school. The backhoe began the two- week job of removing soil from the school playground on Aug. 24, a day before 21 students, including two evacuated from an area closer to the plant, returned to classes.
Yamaki -- who stopped looking after the Kikawada family’s grave three years ago because of age -- said the hamlet, now part of the city of Date, is suffering from the radiation without benefiting from Dai-Ichi. The jobs and wealth from the nuclear donut didn’t extend far enough inland.
“There must be a lot of other ways to generate electricity, like solar,” he said. “They should stop using nuclear power if it causes a tragedy like this.”
--Stuart Biggs, with assistance from Yuji Okada, Chisaki Watanabe, Shigeru Sato, Jason Clenfield, Makoto Miyazaki, Tsuyoshi Inajima and Yuriy Humber in Tokyo. Editors: Peter Langan, Aaron Sheldrick
To contact Bloomberg News staff for this story: Stuart Biggs in Tokyo at email@example.com
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