Can battered Japan rise yet again?

The crisis is not yet over, and rebuilding will cost billions, but the Japanese are no strangers to catastrophe, and if there is one characteristic that defines them historically it is resilience, writes DAVID McNEILLin Japan

ON THE DRIVE north out of Sendai city, in northeastern Japan, a slip road takes you to a motorway that ordinarily would be filled with traffic. This week, though, it was a scene of destruction to rival the most far-fetched Hollywood disaster movie. A thick coating of mud had been deposited at the tollbooth, along with smashed vehicles, motorbikes and heavy machinery from a nearby factory. Beyond the booth the road rose up to meet the highway and a panoramic view of the blitzed landscape below, where a jumble of hundreds of cars, trucks and splintered debris stretched as far as the eye could see. In the background thick black smoke billowed from fires burning at a damaged oil refinery near the city bay.

The huge tsunami eight days ago inflicted similar damage along the pulverised northeast of Japan’s Pacific coastline, destroying farms, factories, villages and whole towns. In some cases the waves drove everything in their path two or more kilometres inland, carrying thousands of people to a watery grave.

In recent days the wreckage and heartbreaking loss of human life have almost been overshadowed by the nuclear crisis that continues to unfold in Fukushima prefecture. This crisis calls into question Japan’s entire energy strategy and may mark the end of its powerful nuclear industry. The nation is now contemplating the folly of erecting so many nuclear plants on one of the most seismically unstable platforms on the planet.

Even as the search for bodies goes on, economists and insurers are calculating the mind-boggling costs of the clean-up. One British insurer estimates that the bill will be more than €40 billion. Japan’s stock market initially plummeted by more than €200 billion, and several percentage points will almost certainly be wiped off GDP.

And then there is the awful human drama: nearly 500,000 homeless, perhaps 10,000 dead, many thousands more injured and the terrifying prospect – not implausible – of thousands more deaths from radiation-related cancer.

Not surprisingly the question is already being asked of whether this battered nation can ever rise again. Japan was, after all, already sliding for two decades before the Pacific tectonic plates shifted with such explosive force the Friday before last. Its economy was being overtaken by China, its population was ageing and its people were saddled with the developed world’s largest public debt.

But this is also a nation that has a remarkable, perhaps unique, history of almost biblical destruction and rebirth. In 1923 a 7.9-scale earthquake and tsunami levelled much of Yokohama and Tokyo, killing at least 100,000 people, and September 1st, the anniversary of the tragedy, is now an annual disaster-prevention day. Quakes have regularly brought Tokyo to its knees, and the nation’s iconic landmark, Mount Fuji, looms threateningly 100km away, always ready to spew ash on the world’s largest metropolis.

As if the natural elements weren’t enough, humans have also conspired against Japan. In March 1945 US bombers dropped close to 500,000 incendiary bombs on sleeping Tokyo, reducing 15km of the city to cinders and killing 100,000 people, who were “scorched, boiled and baked to death”, in the words of the attack’s architect, Gen Curtis LeMay. The firebombing of Tokyo, one of the great forgotten war crimes, was part of a much larger US strategy that included dozens of similar raids on Japanese cities and culminated in the atomic bombing of Hiroshima and Nagasaki, in August 1945.

The second World War killed about four million Japanese, wiped out a quarter of the nation’s wealth and led to the confiscation of all its colonial booty, including Taiwan and South Korea. Yet the country engineered probably the most remarkable feat of economic regeneration in history, climbing from a humiliated postwar wreck to the world’s second-largest economy in just three decades.

This achievement was called the Japanese economic miracle, and there was a time, just 20 years ago, when some predicted that Japan would overtake the US as the number-one global economy.

Even among those who lament the monumental folly of the Pacific war there is enormous admiration for Japan’s ability to dust itself off from tragedy and start again.

“If there is a single word to describe the Japanese people it is resilience,” says Roger Pulvers, a 44-year veteran of Japan and author of dozens of books about the country. “The two great disasters of the 20th century – one natural, the other man-made – prove, in their single-minded recovery, that the Japanese people will prevail in this horrendous trauma and even come out of it leaner and meaner.”

One reason for this resilience is simply the natural environment. After millennia of quakes, tsunamis and volcanoes Japan is used to rebuilding, and has less faith in the permanence of physical objects. Dwellings and even office buildings are torn down and put up every 20 or 30 years. Houses devalue as soon as they are complete and are usually worthless by the end of their short lives. Temples are painstakingly reconstructed again and again on the same spot for hundreds of years. As one commentator recently wrote, “The Japanese manage to build change right into the heart of tradition.”

The demanding natural environment has also surely shaped the national character, which is famously stoic and reserved, at least on the surface. One of my most haunting memories from the 1995 Kobe earthquake, another calamity that levelled much of the historic port city, and took 6,500 lives, was meeting a university professor, in a public toilet. As we washed hands he thanked me for coming to the city to volunteer in the distribution of water and supplies, then calmly told me that his wife had been crushed beside him in bed by a beam from their ceiling. Registering my shock, he apologised for causing me distress, bowed and walked away.

As two other journalists and I walked last weekend through the tsunami-ravaged northeastern town of Minami-Sanriku we met two young men on their way to look for their homes. We were standing near the top of the town, our eyes following the tsunami's two-kilometre trail of muddy destruction towards the sea, a spindly, post-apocalyptic landscape eerily reminiscent of a Tim Burton animated movie. It was clear that there was nothing left of the young men's homes, or of their families, but there were no tears (they might come later), only stony faces and a stark reply when asked whether they hoped to find anything, " Kakunin shimasu," "We have to make sure."

OF COURSE, RESILIENCE and stoicism alone won’t build rebuild factories, towns and shattered communities. That will take money, and lots of it. Barclays Capital puts the estimated cost of rebuilding at between 5,000 billion and 10,000 billion yen (€42 billion to €84 billion), plus a further 7,000 billion yen (€61 billion) in lost output.

These are head-spinning sums, but they are misleading. The money will be ploughed back into one of the world's biggest construction projects, creating employment and wealth. Japan's construction sector is, proportionally, already the largest in the world. Economists suggest that the damage from the Kobe earthquake, in what was a major industrial heartland, was worse in economic terms than the current calamity, which mainly affects the rural coast. And Japan is still the world's third-biggest economy. The authoritative Lex column in the Financial Timesconcluded: "Japan is easily rich enough to deal with this catastrophe."

Paying for reconstruction raises a question often rehearsed, most notably in a famous 1989 essay by Michael Lewis called How a Tokyo Earthquake Could Devastate Wall Street and the Global Economy:what would be the impact of Japan's withdrawing vast amounts of capital from world markets to finance its own recovery?

“The money for revival will come from the big Japanese banks and other financial institutions, which are sitting on huge liquid overseas investments, most notably US treasury bonds,” says a veteran Japan-watcher, the Irish author Eamonn Fingleton. He believes that the markets are already speculating on precisely just such a scenario, sending the yen soaring to a new postwar high this week.

But Karel van Wolferen, author of the seminal book The Enigma of Japanese Power, doesn't believe that Japan's banks will crash the world financial markets. "How do you extract all that from the US economy? It will be done in a very gradual way," he says.

Like many who have followed this country for years, he feels that the money and reconstruction will revitalise Japan’s moribund economy, pulling it out of a two-decade funk and giving it some headwind out of what he calls the doldrums of innovation. “Not only can Japan revive, I think it will, and in a very major way,” he says.

All it has to do, he adds, is ignore the rest of the world, especially Washington, the Wall Street Journaland the Financial Times. "Neoliberals don't understand Japan, because Japan is not a capitalist economy," he says. "It has always done things its own way."

The Japanese way, involving industrial planning co-ordinated by the state and financed by long-term dedicated capital, drove the country’s economy to the top of the global economic league tables before it ran out of steam in the early 1990s. With Wall Street doing a fine job of devastating itself and the world economy, perhaps the Japanese way could be kick-started, directing capital and human resources into new technologies, particularly solar power.

“Japan is ideally placed to do this,” says van Wolferen. “Nuclear power is too dangerous and won’t work.”

For now, all this is speculation. This is a country facing what its prime minister called its greatest challenge since the second World War, a point underlined by this week’s rare appearance of Emperor Akihito on television, inevitably reviving memories of previous national tragedies. The sight of the reedy-voiced, diminutive royal painstakingly reading his script struck some outside Japan as funny, and perhaps it is. But for many Japanese, even the apathetic young who barely know his name, his historic status as the father of the nation makes him a sort of emotional rallying point, a focus for a people licking their bloody wounds.

He would be never be bold enough to suggest it, but the message is clear: Japan is down but not out.