from Asia Unbound

Japan’s Reconstruction Planning

June 24, 2011

Blog Post
Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

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Japanese Prime Minister Naoto Kan (2nd R) attends a cabinet meeting on environment and energy in Tokyo June 22, 2011.
Japanese Prime Minister Naoto Kan (2nd R) attends a cabinet meeting on environment and energy in Tokyo June 22, 2011. (Courtesy Reuters/Frank Robichon/Pool)

Without a doubt, this is a complex moment for the Japanese people. This is both a country struggling with critical governance challenges, and a society recovering from the shock and devastation of a tremendous set of disasters. As I travel, I have been amazed—both at the scale of Japan’s governance problems, and at the immense effort and creativity that has been ongoing across Japanese society since March 11.  

Let’s start with the governance side of things. Since the no-confidence vote on June 2, the prime minister has been hampered by dissension within his party as well as by continued refusal by the opposition, especially the Liberal Democrats, to policy collaboration. Rumors flew this week that some sort of change at the top was imminent, but these proved ephemeral.     

Yet, on Monday, the Japanese parliament finally passed the Basic Act on Great East Japan Earthquake Reconstruction that will organize the massive program of rebuilding the Tohoku region. A new agency, the Reconstruction Agency, whose leader will have cabinet rank, is expected to have broad authority to manage reconstruction. The total budget remains unclear, but already 6 trillion yen (approximately 75 million dollars) has been appropriated in two supplementary budgets to cope with the disaster and a third supplementary budget, the “real” reconstruction budget, is expected to be up for deliberation by the end of this summer. Estimates of the size of that budget range from another 8-10 trillion yen (approximately 100-125 million dollars).

The total cost of Japan’s reconstruction is far greater, however, and clearly this will need to be a partnership between private and public sectors. Tohoku prefectural planners estimate recovery will take ten years. Due out shortly is the first draft of the Prime Minister’s Reconstruction Design Council report that will outline the tasks ahead, and the vision of public and private sector advisors on how best to imagine the future of the Tohoku region. 

Likewise, the Japan Business Federation (Nippon Keidanren) has also been working on its vision of rebuilding Japan, and the gaze of the private sector extends far beyond the Tohoku disaster to include the broader set of transformations Japan badly needs if its economy is to remain competitive. Its “Master Plan for Recovery and Creation of a New Japan” outlines the specific goals of Japan’s businesses.   

The sense of urgency of Japan’s business community, as articulated in the Keidanren master plan, is palpable. Keidanren Chairman Hiromasa Yonekura has urged the government to move faster, and with a greater sense of purpose. Foreign investment in Japan will be much needed if a vibrant recovery is to be achieved.

But there is a growing sense that Japan’s own manufacturers are weighing the costs and benefits of remaining invested in Japan. Without reductions in corporate taxes, a steady energy supply, and far greater investment in next generation technologies and industrial capacities, Japan will lose its appeal as a site of major capital investment.   

Thus, balance between the immediate needs of Tohoku area and the longer term needs of Japan’s economy must be achieved. Government decisions on policy priorities, as well as its success in crafting viable and sustainable partnerships with Japan’s private sector, will set the tone not only for the reconstruction of Tohoku but for Japan’s future growth trajectory as well.

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