JFS Newsletter No.89 (January 2010)
http://www.japanfs.org/en/mailmagazine/newsletter/pages/029714.html

A new decade has just started. At the beginning of the year I drew up my own thoughts on two possible scenarios for Japan in ten years. In this issue of the JFS Newsletter, I will sketch out one of them: What Japan will be like in 2020 if we carry on with business as usual?

-----------------------------------------------------

In this scenario, imagine that the year 2020 has just begun. Just over ten years earlier, the world failed to agree on a framework with concrete greenhouse gas (GHG) reduction targets and measures at the Fifteenth Session of the Conference of Parties to the United Nations Framework Convention on Climate Change (COP 15) held at the end of 2009. After the conference, already industrialized countries and other developing countries, including China, struggled with their responsibilities for the past and those for the future. Under the circumstance where all parties wanted to take advantage of being "a follower" and first probe the intentions of others before making commitments, ten years passed without the world effectively meeting the challenges.

Within the past decade, the impacts and damage of global warming have become clearly noticeable. Especially in vulnerable areas, local communities and ecosystems started to collapse, producing huge numbers of environmental refugees and destabilizing international affairs and the global economy.

What underlies the problematic structure is that we maintained the structure of "economic activities proportional to energy consumption and energy consumption proportional to carbon dioxide (CO2) emissions." Dialogue between countries seeking prosperity were deadlocked, because CO2 reductions was assumed to mean the shrinking of economic activity.

Under such global trends, Japan's GHG emissions continued to rise despite the country's reduction target of 25 percent by 2020. It had declared that it would reach the target "if other major countries participated," but put off taking measures to achieve the goals, saying no major countries committed to participation.

Then arrived "peak oil," the point of maximum global petroleum extraction, after which the rate of oil production entered a terminal decline, something specialists had long warned would occur between 2012 and 2014. In August 2009, the International Energy Agency (IEA), which until then had been optimistic in projections, announced after analyzing 800 oil wells representing three-quarters of world petroleum production that most had already passed their peak production. They said they had been too optimistic, and eventually, the world would see peaks everywhere within the decade. Now in 2020, people are living in the world the IEA projected ten years ago.

The price of crude oil now exceeds U.S.$200 per barrel. Because oil demand in emerging countries and other countries has continued to rise, and as the supply-demand gap has expanded, it is clearer than ever that the price of oil will continue escalating.

With Japan's energy self-sufficiency rate at 4% and fossil fuel dependence at 80% for primary energy needs, efforts to promote renewables failed because government policies changed too often, which discouraged mid- and long-term investments in renewable energy sources. Meanwhile, nuclear power plants were shut down every time an earthquake occurred, and the social structure dependent on imported fossil energy remains the same. Under such circumstances, the economy and Japanese society are now falling into stagnation.

The cost of imported fossil-fuel energy more than doubled from some 23 trillion yen ($250 billion) in 2008 to nearly 50 trillion yen ($540 billion) in 2018, while energy consumption stayed at almost the same level during the decade. Even in 2008, the country spent all the foreign revenues earned by exports from three major industries -- automobile, steel, and electrical and electronics -- simply for the import of fossil energy. Now Japan faces steadily rising prices of fossil-fuel energy, while foreign earnings by export industries decrease.

Ten years ago, Japan already had a large budget deficit, but now the country is on the verge of financial collapse. As it failed to significantly cut CO2 emissions at home, the country was forced to purchase emission credits from abroad to attain its reduction targets under the Kyoto Protocol and the post-2012 framework, in addition to payments for the ever-increasing cost of importing energy. Japanese capital flowed abroad, resulting in a lack of resources to revitalize Japanese industries and society.

Meanwhile, Japan's rate of food self-sufficiency has not increased, staying at around 40% for the last ten years, because Japan did not make the shift to a self-reliant food economy while it still had the financial capability and resources. The food production system has not changed either -- it needs 10 kilocalories (kcal) of fossil fuel to produce 1 kcal of nourishment, because it continues to depend on gasoline- or diesel-fueled tractors and trucks, greenhouses heated by heavy oil, and chemical fertilizers made from natural gas. This means that soaring oil prices and shortages of goods are directly leading to soaring food prices and frequent food shortages, resulting in a growing number of people suffering from lack of food.

Local communities are facing difficulties, too. Unable to create opportunities to launch initiatives toward their own visions through bold policies of decentralization, and with declining populations, communities are getting worn out. As the result of the continuation of car-centric urban planning, communities are still experiencing problems with urban sprawl. Related to this, it is becoming increasingly difficult to maintain welfare services for the elderly who live in scattered areas away from city centers.

Still without a long-term vision, the government continues to waver. It makes frequent changes to its energy and climate policies, offering and then cutting subsidies, and frequently changing programs depending on domestic and foreign pressures. Industries and businesses are unable to make concrete medium- to long-term investment plans, and are at the mercy of unpredictable and inconsistent policies. They have been forced to purchase emission credits to comply with the international commitments pledged by the government.

Against this backdrop, businesses have had no choice but to seek short-term and local means to survive. They fall into the thinking that "things are fine as long as our company is OK" or "we just need good results for this fiscal quarter," and try to move into the black somehow through job cuts and other short-term cost reductions. Doing this, however, means both creating a population without spending power and reducing the purchasing power of society, which is like putting a noose around the neck. Little investment is made in essential R&D and institutional designs for the future.

Meanwhile, Japanese companies have been losing their competitiveness and status in the world, because of an increasing inability to develop effective new products. Japanese society is also losing its sense of ambition and cheer. The birth rate continues to fall, partly because this is not a society where parents want their children to live.

-----------------------------------------------------

This is absolutely not the future I wish for Japan. But if we continue with business as usual, the future of Japan will be very much like this. What can we possibly do to avoid it?

First we need to create the vision of an ideal future for Japan using a technique called backcasting, the reverse process of forecasting. In the next issue, I will sketch out a completely different Japan in 2020, a vision of possibility for the nation. Please watch for it next month!

In the meantime, how about sketching out your own visions for your country, your community, and your company in 2020?