This weekend marked the tragic, one-year anniversary of the Japanese earthquake that lead to the disastrous tsunami and following destruction of the Fukushima Daiichi nuclear power plant (see this recent photo gallery from Reuters).Much happened quickly a year ago that would dramatically and permanently change life in Japan, and while on the face of things, there has been considerable resumption for many, the aftermath of the disaster is still an ongoing recovery story that will likely last decades. The extensive duration of the recovery is based, quite simply, on the radioactive decontamination that must still occur in and around the Fukushima and Miyagi prefectures, to name the worst hit (see this update from Bloomberg).
In the immediate aftermath of the 11 March 2011 disasters in Japan, not only were many homes and lives washed away, but also hit were factories, plants, roads, and the country's energy system (power plants and grids). In the immediate recovery period, power slowly came back on-line and is still operating at a significantly reduced level while the country continues to seek ways forward and likely abandon its previous nuclear-heavy energy portfolio. The issue of energy was and remains critical for the country's industries, especially for the semiconductor and electronics industry. While steady and reliable power were quickly restored for the most essential (rescue and business) cases, consumers and offices continue to engage in alternative solutions to reduce strain on the energy grid. As a result, there has been vigorous adoption of smart meters as well as renewed discussion of alternative energy sources as well as a country-wide smart-grid system. What final decisions will be made is still the topic of on-going political debates both by the public and within the Japanese government. Certainly, Japan will see an increase in the renewable portfolio and smart metering, which is both a positive step for the country and the renewable energy electronics sector, especially.
Beyond the important question of energy restoration and new energy generation is that of the actual recovery of towns, factories, and business in Japan. The issue of community reparation will be a long and difficult road because of the radioactive contamination and new disaster plans implemented by the government. As a result, many communities will be reconstructed only as working towns where inhabitants can come back to work but must live in higher elevation communities (see this report from The Guardian). That change in life is tremendous and difficult, to say the least.
For business, most factories in the semiconductor and electronics sector were either forced to be permanently shuttered, or were reconstructed and back up to normal production quickly, such as Renesas' heavy damaged Naka factory (see this update from Renesas and this August update from EETimes).
Economically, there has been considerable money invested by the government in infrastructure spending, resulting in the quick economic rebound. However, while there is confidence in Japan's continued place among the top economies, the underlying issue of mounting debt cannot be swept aside. While the Japanese government has continued to provide zero-interest programs and thought-out economic stimulus programs, there is ongoing consumer conservatism that is dampening Japanese growth (see this recent video from BBC World News). Japan is facing a trade deficit, the first in nearly 30 years, and the reasons are seen as the problematic manufacturing sector that is unable to compete with regional competitors, as summed up by this FT report. Adding to the problems is the fact that because of the post-disaster, massive infrastructure and social spending, the Japanese government debt is steadily rising and will exceed 937 trillion yen by the end of 2012-13, according to the same FT report. That leaves little left over to help many in the manufacturing sector (see this from The Telegraph), especially the semiconductor and electronics industry where the costs are staggering. Regardless, Japan is still seen as an investment opportunity and a consumer electronics growth market, the likelihood of Japan keeping its economic house in order is very high, supporting secured international bonds sales and Japan continues to be "Asia's richest big economy," as FT notes.
Yet we cannot overlook the most recent semiconductor and electronics industry news. This quarter has been full of news regarding the ongoing difficulties facing Japanese companies, as we discussed last month in this MarketWatch Commentary report. Also still weighing on the Japanese semi manufacturing industry is the situation for Elpida, now in bankruptcy with the hope of restructuring. Of course these Japanese corporate events are having significant impact on the semiconductor and electronics markets, DRAM pricing, for example, has been up after the Elpida news and there is a wait-and-see as there are, naturally, market pros and cons to the potential situation of loosing Elpida as a memory manufacturer, should the worst come to pass for the company. For now, we can just wait and watch as Japan continues to rebuild and reorganize as a country and within critical industries, such as ours.