Archive for April, 2011

Let them rent mansions: Compensation for disaster victims will barely make a difference

Friday, April 29th, 2011

Cleaning up after the March 11 tsunami in Sendai (Satoko Kawasaki photo/The Japan Times)

For seven weeks now people from all over the world have been donating money to various charities to help the victims of the March 11 earthquake and tsunami. According to NHK’s morning consumer affairs show, “Asaichi,” as of April 25 ¥1.7 billion had been collected by Japan Red Cross and other charity organizations. After going through four stages of bureaucratic processing the money was supposed to start reaching victims on April 27. In the first wave of payments, affected households would receive ¥350,000 for each family member who died or is declared missing. If the family completely lost its home in the disaster, it would receive an additional ¥350,000. If the home was partially destroyed, the amount would be ¥180,000. Families who have been evacuated from the area surrounding the Fukushima No. 1 nuclear reactor receive ¥350,000.

That cash will certainly help, but as explained in an earlier post the burden of rebuilding shattered lives mainly falls on the central government, which will only compensate homeowners and businesses by so much. And as explained in another post, earthquake insurance, like supplemental medical insurance, is not designed to cover entire losses. Basically, benefits provide a little extra money, something to live off of while a homeowner or business owner decides whether or not he wants to go through the grueling process of starting over from scratch, which means borrowing money. NHK interviewed a Sendai family whose 4-year-old home was spared from the tsunami but nevertheless condemned by the local government because the landfill under it had subsided to the point where the foundation was at risk. They still owe more than ¥20 million on their 30-year mortgage and though they have earthquake insurance the benefits will cover, at most, only half the balance; which means they have to come up with the other half of the loan themselves. Then, presumably, they have to take out a new loan if they want to buy a new house. According to one financial planner on the show, they’d be better off renting, “but, of course there are financial disadvantages to renting,” she added. Obviously, in this case, there are even bigger disadvantages in owning.

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Disasters kill appetite for travel during Japan’s high season

Saturday, April 23rd, 2011

Peak season slump: Nikko JR Station in the spring

To no one’s surprise, consumer confidence dropped during the month of March, according to the Cabinet Office , by 2.3 percentage points, the steepest month-on-month decline since April 2004. The office surveyed 4,704 households throughout Japan after the earthquake of March 11 to gauge consumption sentiments and found negatives across the board, meaning not much desire to spend money. In particular, only 30.3 percent of the respondents said they were planning to travel for pleasure between April and June, usually a peak tourist season in Japan. The portion was 3.3 points lower than it was last year, another record drop.

Golden Week falls in this period, but it’s also the time when students go on school trips. Normally, junior high schools and high schools in Western Japan and Hokkaido visit the Tokyo Metropolitan area, but one major travel agent interviewed by the internet news service J-Cast said that 80 percent of the schools planning excursions to Tokyo have either cancelled their trips “or indicated they may cancel” them. One junior high school in the Kansai area told J-Cast that it had changed its trip from Tokyo to Kyushu because “public transportation in Tokyo is still a problem and radiation in Shinjuku remains above safe levels.”

According to the Osaka Board of Education, 20 percent of its 130 junior high schools had planned to go to Tokyo and all “are thinking of going somewhere else.” An Okinawan travel agency said that 50 Kansai schools comprising some 5,000 students had changed their travel plans from Tokyo to Okinawa in the past several weeks.

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Summer electricity shortage countermeasure: Make your own

Tuesday, April 19th, 2011

Money on the roof

Last Friday night Tokyo Electric Power Co. announced, just in time for the nightly news, that it would be able to provide up to 52 million kW by the end of July. At present, the company can provide a maximum of about 42 million kW. Usually during the hottest days of summer they need 55 million, and if this year’s weather is anything like last summer’s, they could need 60 million.

So if Tepco’s assurance is sincere, there should be no problem with supply for the near future. The government has asked households to reduce their energy consumption by 10 to 15 percent, and consumers have already started getting into the habit of saving electricity. Still, if the crisis has taught us anything, it’s that we can’t proceed under the current system of energy supply. Changes need to be carried out on a national scale, but before that happens individuals with means will certainly look to assure their own electricity needs by themselves, and some manufacturers are only too happy to help.

In terms of cheap, makeshift solutions, one can always buy a portable generator with an AC outlet. Honda makes one for the agricultural market called Enepo at a list price of ¥10,470. It runs on two cassettes of liquid propane gas, the kind you use to run those portable gas ranges, and can produce 900kW for two hours. The main catch is that you’re supposed to keep it outside, but that shouldn’t be a problem in the summer. A representative of Honda told TBS that even since the earthquake orders for the generator have increased tenfold. Also, the retailer Yamada Denki is working with a company called West Holdings to make a large rechargeable lithium battery for home use. The battery can be recharged through a home outlet at night when electricity is plentiful, and then used during the daytime if the need arises.

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Consumers suddenly rushing back to pariah produce

Thursday, April 14th, 2011

On Tuesday, Chief Cabinet Secretary Yukio Edano took part in a bazaar in front of the JR Shimbashi Station in Tokyo that featured produce from Iwaki in Fukushima Prefecture. Iwaki is just outside the evacuation perimeter set by the government, and Edano assured shoppers at the bazaar that the food from Iwaki and other Fukushima farms “that are sold in markets are perfectly safe.” To prove it he ate some strawberries and tomatoes.

Edano’s reassurances recalled a similar stunt carried out by the current prime minister, Naoto Kan, in 1996 when he was the health minister during a food-poisoning outbreak that was blamed on daikon radish sprouts. In order to reassure consumers that the sprouts were in fact safe, Kan ate a bowl of them on TV. The implication is that rumors about food safety often outrun the facts, and the government has little recourse except to offer visual proof that the fear of tainted food is unsubstantiated. Usually, however, it’s the government that exacerbated the rumors in the first place.

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Disaster area quickly becomes huge automobile market

Friday, April 8th, 2011

One of the most indelible images people will take away from all those horrifying videos of the tsunami of March 11 is automobiles being swept up by the dozens and carried away. What’s important to remember about the Tohoku region, especially the coastal part, is that cars are an indispensable component of everyday life there. In Tohoku, there is one car for every two humans. Because much of the area is cut off from the rest of Honshu by mountains, there aren’t that many train lines. In fact, many of the people who died were in their cars at the time, trying to escape inland after the tsunami alert was broadcast. There are many stories of people driving to the homes of elderly relatives to pick them up and then getting caught in the wall of water.

In Miyagi Prefecture alone, according to a report on TBS, 146,000 vehicles were destroyed. The central government has pledged to do the cleaning up, but cars pose a special problem. Much of the debris is beyond being recognizable, but cars, even ones that no longer function, tend to be intact and thus are considered private property by local governments. They cannot simply be carted away as garbage. The process so far has been for tow trucks to bring the damaged vehicles to large lots where the owners can claim them and then sign a release allowing them to be scrapped.

However, in many cases the owners don’t even know where their cars are, so it is taking a long time to process all the junked cars being brought to the lots. For instance, hundreds of cars were parked at Sendai Airport when the tsunami struck, and afterward their owners came to look for them but couldn’t find them. Local governments have to somehow inform those people where the collected automobiles are being kept, and it’s time-consuming. But that’s not the end of the process. As one mechanic told TBS, before the car is scrapped and placed in a compactor, all the mud has to be removed from the interior. (Removing the gasoline isn’t a problem since it seems that in almost all cases thieves had already siphoned off the fuel when the tow trucks showed up.) Before scrapping, the engines are removed and can sometimes be recycled, but not in this case. Sea water effectively destroys automobile engines.

If anyone benefits from this aspect of the tragedy it is, of course, automakers. Since the eco point system ended last year, manufacturers have been looking for a means to boost sales, and now they have an instant customer base of hundreds of thousands of potential buyers. The central government is going to help with a bill that will provide certain tax exemptions for victims of the earthquake/tsunami. Any victim who purchases a car, either used or new, will not have to pay the automobile purchase tax; nor will they have to pay the regular car tax based on weight, which is due when you register the car and every time you bring it in for mandatory inspections. Already, there is a paucity of available vehicles for sale in the Tohoku region, a situation exacerbated by production fall-offs nationwide due to a shortage of parts that are made in the Tohoku region. However, today Toyota announced that it would resume car production on April 18. There’s no time to lose.

Earthquake insurance put to the test

Tuesday, April 5th, 2011

Though property insurance for damage caused by earthquakes is available in earthquake-prone Japan, there is, technically speaking, no such thing as earthquake insurance. Thanks to a deal struck by the national government and private insurers in the 1960s, individual homeowners who take out fire insurance policies can add a rider for earthquakes (which also includes tsunami and volcanos). Claims are paid out of a large fund that is maintained by the two partners, and according to the Nihon Keizai Shimbun this fund currently contains ¥2.3 trillion. The insurance industry projects that there will be about 500,000 claims filed for property damage, amounting to ¥1 trillion in payouts.

Damage assessed; next step, compensation (Yoshiaki Miura photo/The Japan Times)

So there’s enough money in the fund to cover at least private individual claims. However, when you look at the policies in detail these payouts will not be enough to recoup much of what was lost in the disaster. Available fire insurance policies(kasai hoken) for private homes cover up to ¥50 million if the entire home is destroyed (zenkai), and people can insure other property, such as furniture, for up to ¥10 million. However, earthquake insurance only covers 30 to 50 percent of what fire insurance covers. So if the coverage of your fire insurance policy is ¥10 million, you only receive from ¥3 million to ¥5 million when the home is destroyed in an earthquake. Moreover, damage insurance only covers the value of the home at the time of the accident or disaster, so if the value has decreased over time, you will only receive payments based on that lesser value. And fire insurance by itself usually does not cover a fire caused by an earthquake. You need coverage for both.

It’s assumed that the average payout in the Great Eastern Japan Earthquake for homes with coverage will be between ¥2 million and ¥3 million. The average damage insurance payout for the Great Hanshin Earthquake was a bit over ¥1 million per home. Altogether 65,000 claims were made for a total of ¥78 billion. At that time, only 9 percent of homes nationwide carried earthquake insurance, and only 3 percent of homes in Kobe did. Since then, the national portion has increased to 23 percent. In 2009 alone, 46.5 percent of homeowners who took out fire insurance added earthquake coverage. Not surprisingly, sales vary widely from one region to another based on frequency of temblors. In geologically active Aichi, Tokyo and Miyagi, as much as 30 percent of homeowners have earthquake insurance. The portion drops down to 15 percent in Gunma and Nagano prefectures.

One bright spot is that the utter destruction of the disaster may actually speed up the claims process. After the Hanshin earthquake the process took a long time because insurance companies had to assess the damage to properties in order to decide if they were “totally destroyed” (zenkai), “half destroyed” (hankai), or “partially damaged” (ichibuson). These are the only three categories for payouts and determine the amount of the payout. Because of the utter destructive power of the tsunami that destroyed much of the coastline of the affected area, the General Insurance Association of Japan, which represents all damage insurance companies, is assessing properties in a joint manner from the air, where it becomes apparent that all homes in a given area are zenkai. There is no need to check each property on the ground. In addition, policy-holders will not be required to bring in their policies to make claims, since so many lost documents in the tsunami. All they need to provide is identification. Even if a claimant forgets which company his policy is with, the association will find out.

Still, some policy holders could be in for a shock when they read the fine print. For instance, homeowners in Urayasu, Chiba Prefecture and other localities where houses were damaged by liquefaction may discover that their earthquake policies don’t cover that particular eventuality. But the Life Insurance Association of Japan has risen to the occasion. Most general life insurance policies don’t cover deaths from earthquake, but the association has said that its member companies will make an exception for the current disaster.

Small businesses ask for restraint with the self-restraint

Saturday, April 2nd, 2011

Normally this time of year people are in a party mood, what with the cherry trees blooming, temperatures rising and students on spring break. That mood has been effectively dampened by the enormous suffering up north, but recreation in general is being discouraged by several related factors, such as the call for energy conservation and reduced public transportation. Small businesses, especially restaurants, bars and events promoters, are being hit the hardest, even if their enterprises were not affected directly by the earthquake.

They certainly don’t appreciate the well-meaning but short-sighted official requests for jishuku, or self-restraint. Making such a request sounds paradoxical: Can self-restraint be compelled from above? At a press conference on April 1, Renho, the Democratic Party of Japan lawmaker who was put in charge of energy conservation, blasted Tokyo governor Shintaro Ishihara for a remark he made implying that it’s unseemly for people to want to “drink and chat” at a time like this. Renho said that Ishihara shouldn’t use his political platform to “restrain people’s freedoms and social activities,” which have negative economic consequences.

According to the Fuji TV morning show, “Toku Da Ne,” as of April 1, 1,320 concerts and other events featuring foreign performers had been canceled due to fears of radiation from the damaged Fukushima power plant. In fact, one events company has already gone out of business as a result, and that company is headquartered in Fukuoka.

Those cancellations can’t be helped. What’s more problematic is that many Japanese are being made to feel guilty about going out and spending money. Fuji TV cited a survey of 301 small businesses in Tokyo. Eighty percent said that their business has fallen off sharply since March 11. So one French restaurant decided to buck the whole jishuku movement and started advertising a 30 percent discount on all meals for the time being. They’ve been packed ever since.

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