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Contents

Executive Summary ....................................................................... iii
1. Introduction to the issue............................................................. 1(1)

Historical context of nuclear power in Japan .......................... 1(2)

Current status of nuclear power .............................................. 9(3)

Requirements for sustaining nuclear power ........................... 16

2. Policy proposal for laying the groundwork for nuclear power ..... 20(1)

Basic structure ..................................................................... 21(2)

Policy proposals for individual issues .................................... 28

3. Future processes ....................................................................... 58(This report is the English translation of the Japanese report released in Nov.
2013 by 21st Century Public Policy Institute.)

Executive Summary

Toward a Comprehensive Solution for Nuclear
Policy and Business Challenges
Akihiro Sawa, Senior Executive Fellow
Sumiko Takeuchi, Deputy Project Leader of Nuclear Policy issues
The 21 st Century Public Policy Institute, Keidanren
Nov. 14th, 2013

1. Introduction to the issue
The accident at Tokyo Electric Power Company (TEPCO)’s Fukushima
Daiichi Nuclear Power Plant revealed that the response measures
stipulated in the conventional framework centered on the Act onCompensation for Nuclear Damages were insufficient in the event ofwidespread nuclear disaster. With this in mind, this paper will study a
proposal for a new nuclear disaster response system and how Japan
should set the stage for the sustenance and continuity of nuclear power
operations (power generation and back-end operations). It will discuss
strategies to comprehensively manage the various risks related to nuclear
power

projects(nuclear

accidents,

enhancedregulations,

reducedoperation ratios, financing, etc.).
(1)

Historical context of nuclear power in Japan
This subsection reflects on the political and economic background of

the initial introduction of nuclear power in Japan, and briefly look back on
the context in which it has come to be “privately run under national
policy,” the incompatibility between nuclear power business and thederegulation of the electric power system, and Japan’s nuclear fuel cycle
back-end policy.
(2)

The current status of nuclear power in Japan
Important changes have occurred in the contextual background of

nuclear power generation after the accident at the Fukushima Daiichi
Nuclear Power Plant (“Fukushima accident”). Prominent change has beeniii

observed in the political environment. Although the Innovative Energy andEnvironment Strategy in which the DPJ government resolved to phase out
nuclear power was not endorsed by the new administration, the former
pro-nuclear policy mood remains absent even with the comeback of the
LDP-New Komeito coalition. This is a result of structural changes
occurring to the diluting political support for nuclear policy.
The situation has evolved as such for the following reasons: 1) with
anti-nuclear public opinion having sustained in the stalled resolution of
the accident, distrust towards the national government and companies has
yet to be dispelled; 2) the acknowledgement that energy must be
quantitatively secured has been undermined in the prolonged economic
recession, along with receding memories of the oil crises; and 3) highexpectations

fornucleartechnology

andappreciation

of

it

as

state-of-the-art technology have been lost in the Fukushima accident.
Itisurgentthat

nuclearenergyisbothpoliticallyandadministratively reaffirmed as a “particularly” vital energy source to Japan
from the perspectives of energy security, economic growth, and climatechange countermeasures. The national government should reconfirm its
commitment to nuclear policy by means of the Basic Energy Plan and otherCabinet decisions from an administrative perspective, and in the form ofparty decisions adopted by the ruling party, in political terms. This will lay
the groundwork for future system reforms and the establishment ofrelevant budgets.
A second change is the advancement of electric power system reforms.
The scheduled blackouts and lack of capacity for mutual provision ofelectricity which occurred in the aftermath of the Great East Japan
Earthquake exposed the flaws of the conventional power system; andtherefore, the ongoing electric power system reforms aim to enable theJapanese system to balance supply and demand in the market byderegulating electricity prices. The most important feature of these reforms
in relation to nuclear policy is the legal unbundling of the powertransmission/distribution sector and the abolishment of tariff regulations
based on fully distributed cost (FDC) pricing and general mortgage bonds.
These measures have ensured the procurement of funds for installing
generation and distribution equipment required for electric powercompanies to fulfill their legal obligation to supply power under theiv

Electricity Business Act. The abolishment of such measures and its
ensuing changes in corporate finance that will result from the legal
unbundling of the transmission/distribution sector will impose an
unpredictable impact on nuclear power investment, which calls for stablelong-term financing. In addition to detailed discussion on electric powersystem reforms, deliberation is needed on means to limit the financing
risks embraced by nuclear power, including public support measures.
Renewable energy, on the contrary, has been granted the status of aclimate-friendly alternative energy source to replace nuclear energy by“national policy,” and its financing risks have been eliminated under the
feed-in-tariff (FIT) program, which ultimately amounts to FDC pricing. The
structure of these issues is exhibited in Figure 1.

(Critical for energy security and climate change)义Stable supply乊

1DWLRQDOSROLF\
Nuclear power

FDC pricing / general mortgage bonds

Renewables

Feed-in-tariff:KLFKZD\IRUQXFOHDUSRZHU‫ء‬Judgment of “specialness”

Abolished in deregulation process

义 0DUNHWPHFKDQLVP GHUHJXODWLRQ
LNG

Coal

Petroleum

Unstable supply

6HFXUHILQDQFLQJ ,QVHFXUHILQDQFLQJ

6WUXFWXUHRILVVXH

Nuclear power乊Source: compiled by author

Figure 1

Structure of issue

The third change has occurred in safety regulations. The “backfitting”
rule is an example of retroactive rules and standards that were noteffective at the time of licensing, and poses risks of impairing long-termv

investments. Therefore, regulatory risks must also be included among
nuclear business risks in the future.
(3)

Requirements for sustaining nuclear power
The first requirement is the political and administrative confirmationof the “special importance” of nuclear power. Politicians and government
officials share the responsibility to explain not only the necessity of
nuclear power as an electric power source but also how the public will
benefit from the advantages of sustaining nuclear technology and relevant
human resources. If nuclear policy is to be steered in the direction ofstronger national government intervention in the process of reviewing andreconstructing nuclear power operations, government assurance that theuse of nuclear power is beneficial to the general public as well as to nuclear
operators will serve as the rationale behind the policy.
Thesecondrequirementistoestablishasecurefinancingenvironment including public support measures in light of the changes in
the contextual background of nuclear power operations aforementioned insubsection 2).
The third requirement is implementing regulations to promote andfacilitate technological innovation. In order to advance human resources
development and technological succession while encouraging competition
for improving safety beyond legal obligation voluntary safety competition
among companies in the middle- to long-term as well as promoting thereinstatementofnuclear

power

and

incorporatingnewtechnologicalinnovations, the Act on the Regulation of Nuclear Source
Material, Nuclear Fuel Material and Reactors (Nuclear Reactor Regulation
Law) must be fundamentally reviewed (in terms of desirable regulatory
standards, methods and activities). If the Nuclear Reactor Regulation Law
and the Nuclear Regulation Authority are to specialize in regulating
nuclear safety, then the current Nuclear Reactor Regulation Law, which
covers a mixture of operational regulations and safety regulations should
be fundamentally restructured from the viewpoint of securing nuclear
material

management

andflexibility

innuclearoperations.

Anadministrative body to oversee the peaceful use of nuclear energy in placeof the Atomic Energy Commission of Japan (AEC) is also called for.

vi

2. Policy proposal for laying the groundwork for nuclear power
This section will propose a policy package to comprehensively resolve
the abovementioned challenges. It is important that the national
government’s commitment to nuclear power is reconfirmed both politicallyandadministratively,for

examplebybundlingtherelevantlawamendments and new policy measures composing the policy package into
the form of a bill on the Management of the Operational Context of Nuclear
Power. This would also be premised upon a clarification of the position of
nuclear power in the electric power reforms.
The proposed policy package is illustrated in Figure 2 (TEPCO’s
position requires separate consideration):

Mutually-related
Amendment to Nuclear Compensation Act(=limited liability or ceiling on indemnification)
Diversification of risk financing techniques
inlcuding e.g. reinsurance by government

Replacements
䋨incl. new installments䋩

policy-design䋺New institutions

Rationalization of regulatory activities ofRegulation Authority(=amendment to Nuclear Reactor Regulation Law)

Private sector capital market

Private investment

Safety improvements and maintenance oftechnology and human resource basethrough new investments andconstruction (including exports)

䋺Existing institutions

Government-supported loan guarantees,
strike price system and the like in the case of
deregulation (abolishment of FDC pricing andgeneral mortgage bonds)

R&D funds / operation funds

Public funds / public financial institution(Special account for power sources development /industrial investment account)Back-end Policy Headquarters
Nuclearpower
plants ingeneralHighly-aged
reactors,
nuclearpower plants
unsuitable forbackfitting(public-private committee / implementation body)
Adjustingaccounting rules topromotedecommissioning

Decommissioning
management company
Abnormal
Normaldecommissioning decommissioning

8 electric power companies

Decommissioning

Middle- to long-termbusiness options

Special company for nuclear
power established by law
䊶Joint private or public-private capital
investment
䊶Ideas for simultaneous establishment ofbody for international operations

Decomissioning
body
Middle- tolong-termbusiness
options

Fukushima Daiichi(#1)
䋨reactors 1-4䋩Kashiwazaki-kariwa
Fukushima Daini(#2)
Nuclear plants

Recyclable-Fuel
Storage
Company
InterimStorage

Japan
Nuclear
Fuel
LimitedReprocessing

NUMO
Final
disposal

Cross-cutting
researchfunctions(from JAEA)

Research

Implementing body to be initially assumed by TEPCO(incl. as subsidiary)

Indemnification
debts

Transmission/
distributionsector

Generation
sector䊶䊶䊶䊶

TEPCO䋨Јholding company䋩
Source: compiled by author

Figure 2

Framework for comprehensive resolution for nuclear issues(Act on the Management of the Operational Context of Nuclear Power)

vii

(1)

Private sector-led replacement of highly-aged reactors
The first important element of the proposed policy package is

promotingthereplacement(includingreconstruction

and

new

installments) of highly-aged nuclear reactors through private initiative.
Human resources must be fostered for the robust technological succession
required for the retention of nuclear technology. Furthermore, theknowhow and knowledge obtained through actual involvement in theconstruction work at nuclear power plant sites are indispensible for the
improvement of safety at domestic nuclear power plants. International
expansion of nuclear operators should also be strongly encouraged in lightof promoting technological advancement through competition.
Commercial reactors should be replaced using private funds.
However, deregulation will complicate fund procurement; and therefore,
electric power companies will have to make decisions regarding the role ofnuclear power in its business structure and how much money it will invest
and where that money would come from.
In order to facilitate decision-making, the government must clarify
whether nuclear power plants will be utility power plants gaining policy
support under national policy, or merchant power plants exposed tomarket competition, as in the case of thermal power. Another idea would
be to distinguish replaced power plants and those bearing high policy
significance from existing power plants by designating the former “publicbenefit power sources” (utility power plants), while the latter would bemerchant or competitive power sources
Firstly, if nuclear power will continue to be granted the status of a“public benefit power source,” alternative price regulations will be needed
to replace the FDC pricing scheme, which will be abolished. Somesuggestions include: 1) a debt guarantee scheme backed by the national
government (or other public institutions with equivalent credibility); 2) a
strike price system as recently taken in UK 3) contracts between
transmission/distribution companies or the wholesale electric power
exchange and their choice of electric power companies to constantly
purchase a fixed amount of electricity sourced by nuclear power.
If nuclear power should newly be designated merchant power, aframework will be needed to allow companies to capitalize lost earnings
that have become unrecoverable as a result of regulatory changes,viii

including those regarding safety regulations, and to recover the stranded
costs from wheeling charges.
Furthermore, as the debate on unbundling power generation anddistribution

develops

andthefinancialmanagement

and

fund

procurement schemes of the holding company and group companies undera legal unbundling model are determined, nuclear power operations may
have no other choice but to undergo restructuring (cf. “middle- andlong-term business options” in Figure 2), in which case the government
will be required to consider providing the funds entailed for restructuring(capital investments, debt guarantees, etc.), implementing tax incentives(registration and license tax exemptions), clarifying its approach to theabovementioned

strandedcosts,

takingAntimonopoly

Act-related

measures (exemption, clarification of requirements, acceleration of
investigation

procedures, etc.),

accordingsafetytoregulations

retainingandoperatingaccelerating

licensesotherissuedlicensingprocedures under relevant laws.
(2)

National government-led approaches to back-end issues
The back-end issue, which has become the largest impediment to thesustenance and continuity of nuclear power generation must be addressedby the national government with more proactive responsibility. The
government is required to perform its role of implementing policies and be
responsible for the processing of spent fuels through to final disposal afterreactor decommissioning. A “Back-end Policy Headquarters” should beestablished directly under the Cabinet, as an administrative body that willplan and draft relevant integrated policies in place of the AEC.
Furthermore, in accordance with the basic principles determined by
the “Back-end Policy Headquarters,” a mechanism will be required toadjust the discrepancies between public and private sectors in the
progress and scale of operations. Options for such a mechanism include:(i) establishing an “Organization for Nuclear Back-end Operations,” aspecially-approved corporate body or special company established by law(For example, the organization could be established as a permanent entitywith the government holding a two-third share and electric powercompanies, a one-third share. Policy continuity and the assignment ofresponsibility would be made explicit.); and (ii) establishing a looseixpublic-private partnership, such as a “Joint Committee for Public-Private
Coordination of Nuclear Back-end Operations.” (Nuclear interim storage
and reprocessing are currently operated by the private sector; andtherefore, this option will help avoid confusion induced by drasticchanges.)
Back-end operations should be assumed by an entity that will still
exist in the distant future (at least one hundred years later), and since theoperations do not generate profits, there is no incentive for private electric
power companies to continue them. Even if operations are initiated underoption (ii), they should appropriately be shifted to option (i) in the middleto long-term. This will enable a single entity to integrate the entire nuclear
back-end process of decommissioning, interim storage, reprocessing, final
disposal of radioactive waste and all cross-cutting research under its
supervisionandassumecomprehensive

responsibility

for

their

implementation.
From the perspective of minimal costs and effective implementation,
the Organization should make the decisions regarding operational strategy
but basically outsource actual operations to the private sector, withreference to the UK Nuclear Decommission Agency (NDA)’ s scheme.
Although the implementation structure for decommissioning the
Fukushima Daiichi Nuclear Power Plant requires separate consideration(TEPCO should take the initiative in the immediate future), othercommercial reactors as well as those installed by government institutions(Japan Atomic Energy Agency (JAEA) and the Power Reactor and Nuclear
Fuel Development Corporation (PNC)) will eventually be faced with theissue of decommissioning. It will be important for the Organization for
Nuclear Back-end Operations to assume the disposal of “negative heritage”
for a certain price.
A scheme for the efficient and effective implementation of long-term
decommissioning operations –for example, injecting public funds from theSpecial Account for Energy Policy - is called for to cover disposal costs thatwill contribute to the advancement of decommissioning technology as awhole. Furthermore, institutional measures should be deliberated in orderto recover a portion of the total public funds incurred in the entire
decommissioning process by selling the decontaminated land uponcompletion of decommissioning operations.
x(3)Rational regulations by the Nuclear Regulation Authority
The Nuclear Regulation Authority would be unnecessary if Japan

were to end nuclear power generation. Nuclear power can be phased out
both legally and politically by other means. Nevertheless, the NRA has
been retained with the expectations that it will deliberate and implement
the safety regulation standards and activities required to safely operate
nuclear power generation facilities, which are economic assets based onlarge investments, and that the national economy will come to enjoy theprovision of inexpensive and stable energy supply.
1)

The general public as well as regulators and the regulated shouldshare the acknowledgement that the safety standards established by
the NRA are only requirements for approval of nuclear power
operations and that they are not at all evidence of safety in nuclear
power plants. A scheme should be designed embedded withincentives to promote safety improvements through competition
among operators.

2)

The regulatory activities of the NRA should no longer be focused on
calculating hardware structure and checking for document flaws
but should instead be shifted to assessing integrated risks,
including organizational governance and human factors, andsecuring the human resources required for such activities in termsof both quality and quantity.

3)

In order for thorough engineering technology-oriented deliberation
on safety standards and regulatory methods to take place between
the NRA and operators, the NRA should enhance its staff functions
by establishing a Special Committee on Technology, and operators
should establish an organization that will compile expertise andknowhow from operators and manufacturers and serve as a liaisonfor opinion exchange with the NRA.
Furthermore, the NRA has other critical tasks, which are equally as

important as conformity assessments for backfit requirements andfracture zone surveys. These include the collection and announcement ofscientific information on low-dose exposure and support for formulating
regional disaster prevention plans.

xi

(4)

Structuring a new nuclear disaster response system
The Fukushima accident brought to light the drawbacks of thecurrent nuclear damage compensation program. The current program 1)
fails to address the problem that once an accident occurs, entire
communities collapse; 2) obligates nuclear power operators to continue toprovide a stable supply of electricity despite being faced with limitlessdebts

relatedtodamagecompensation,

decontamination

anddecommissioning; and 3) does not embed incentives for operators toengage in self-governed competition with other operators over safety
improvements.
With an aim to resolve such issues, a three-layered nuclear disaster
response scheme is proposed (Figure 3). This system reform plan is not
limited to making amendments to the Act on Compensation for Nuclear
Damage and seeks to be a comprehensive victim compensation measure aswell as to distribute damage costs.

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Source: compiled by author

Figure 3

Proposal for new policy architecture
for nuclear damage recoveryxiiTaking into consideration the distrust prevailing in terms of thetechnological and organizational competence of all nuclear power
operators in general in the aftermath of the Fukushima accident, a schemethat penalizes (by imposing economic burden or weighted inspection items)
operators that neglect to strive to improve safety levels and awards those
who achieve high performance in safety operations is needed.
For example, Japan could adopt a program similar to the US Reactor
Oversight Process (ROP), under which the Nuclear Regulatory Commission(NRC) links performance indicators of reactors with a weighted range ofadditional inspections and makes the findings available for public access.
Reactors with high performance could be given the incentive of longer
intervals between regular inspections. Furthermore, the insurance
premium under the government-sponsored indemnity agreements forcompensation of nuclear damage could be linked with performanceindicators, and insurance premiums (rates) of the new nuclear energy
liability insurances system proposed below could be associated withperformance indicators and peer review assessments.
We propose the establishment of an “ex-post-levy-collection-based
mutual assistance program,” a larger mechanism that embraces theabovementioned ideas. By introducing this scheme, nuclear power
operators would “share a common destiny” in terms of safety operations.
This means that once another operator causes an accident that inflicts
damage, an operator will immediately suffer significant impacts on its
corporate finances.
Since the Fukushima accident, the Japan Nuclear Safety Institute(JANSI) has involved operators in a peer review process on safety at
nuclearpower

plants.

An“ex-post–levy-collection-based

mutualassistance program” would help enhance the effectiveness of suchprocesses. By limiting damage compensation payments to a certain range,for example 2 - 4 trillion yen, accident risk levels can be measured inadvance, thereby resolving some financial issues.
The

U.S.

Price-Anderson

NuclearIndustries

Indemnity

Act(Price-Anderson Act) also contains a “mutual insurance” arrangement thatfunctions similarly. Concerns that setting an upper limit to the damage
compensation payment to be made by operators may constitute moral
hazard can be dismissed with the simultaneous establishment of anxiii

effective mutual supervision scheme. Currently in Japan, under the
Nuclear Damage Compensation Facilitation Corporation Act, operators
must pay a general contribution to the Nuclear Damage Liability
Facilitation Fund. The general contribution system would be abolishedwith the introduction of the new “mutual assistance program” proposed
above.
In the case of TEPCO, various supporting and opposing opinions were
presented regarding its legal liquidation, which was dismissed on the
grounds

that

it

would

lead

to

delayedandinadequate

damagecompensation and pose serious operational problems in coping with theaftermath of the accident. This decision was based on the judgment thatcompensation for nuclear damage must be fully made, transactions related
to the stabilization of the nuclear accident could be continued, and capital
investments should be made for a stable electricity supply.
The establishment of a mutual assistance scheme and a mutual
supervision scheme, accompanied by the introduction of upper limits topayments liable in compensation for nuclear damages promise higher
safety levels and lower accident risks, and will significantly lower the
possibility of operators being hammered by excessive debts, derived solely
from compensation for damages. However, the chances of businessorganization cannot be fully dismissed; and therefore a scheme should beconsidered in preparation for such cases.
Under a limited liability scheme, when total compensation costs
exceed the sum of upper limits for operators and funds available from themutual assistance scheme, the compensation of victims becomes anational

government

agenda,thereby

invoking

the

“Act

on

the

Compensation of Nuclear Disaster and Local Reconstruction” proposed in
Figure 3. The Swiss nuclear damage indemnification law, which provides
for the joint cooperation of the national government and nuclear operatorsin addressing cost-related issues in major nuclear disasters, should bereferred to.
(5)Addressing local community collapses
In a major nuclear disaster, the damage is widespread geographically,

as well as in content and time. Furthermore, damages such as lost local
communities and employment issues are difficult to be recovered only byxivmonetary indemnification. Therefore, it is more than obvious that attempts
to resolve such issues according to the current Act on Compensation for
Nuclear Damage, which is based on a tort law framework, can only beeffective to a limited extent.
In the event of an accident that creates a massive number of victims
across a wide geographical area and is likely to be followed by a prolonged
aftermath, the government should importantly go beyond providing
financial assistance based on the Nuclear Damage Compensation
Facilitation Corporation Act to assuming the responsibilities of victim
compensation and restructuring affected areas, while requiring theconcerned operator to cooperate in those activities..
This

could

be

achievedbyincorporating

additional

disastercompensation (the national government takes over the complaints
extended to operators and an organization with pooled funds similar to arelieffund

will

address

them)

and

variousmeasures

on

local

reconstruction into the same law. An “Act on the Compensation of Nuclear
Disaster

and

Local

Reconstruction”

could

cover

decontamination

operations run by government funds, industrial policy measures to attract
companies to the region as well as encourage the establishment of new
businesses in order to secure employment for victims, an increased ratio of
publicworks

subsidiesavailable

for

the

reconstruction

of

local

infrastructure, continued free healthcare checkups, and measures to deal
with and prevent economic losses and other damages incurred by the
spread of bad rumors. Compensation methods employed in past dam
construction projects may also be referred to.


3. Future processes
In order to advance the abovementioned measures to slay thegroundwork for nuclear power operations, we must consider theircorrelation with the processes and schedules of the following related policy
agenda.
1) Formulation of the Basic Energy Plan and preceding deliberationsin the Energy Subcommittee of the Advisory Committee on Natural
Resources and Energy (joint deliberations on global warming
xv

countermeasures in the Industrial Structure Council and theCentral Environment Council are also closely related)
2) Timeline and details of the draft proposal for amendments to theElectricity Business Act (electric power system reforms)
3) Addressing revisions to the Act on Compensation for Nuclear
Damage4) Developments in the NRA’s backfit-related screenings for approval
and licensing5) Review of TEPCO’s Comprehensive Special Business Plan,
including radiation-tainted water (restarting nuclear power plants,
tariff-related issues, financing, etc.)
6) Developments towards restarting the Japan Atomic Power
Company’s Tsuruga Nuclear Power Plant
7) Completion and operation of Japan Nuclear Fuel Limited’s
reprocessing plant and status of the Recyclable-Fuel Storage
Company (RFS)The details of these elements should be more concrete before the endof the year; and therefore the general framework for a comprehensive
solution to the nuclear power issues which has been proposed in thisreport should be brought to public attention before the turn of the year.
Preparations should be made for submission to the ordinary diet session in2015 so that specific policy measures can be drawn up next year for
implementation through various bills and budgets the following fiscal year.
We hope that this report will contribute to the improvement of ourcountry’s scheme for compensating victims of nuclear disaster and to thesound development of nuclear power operations.

*This report is the based on research efforts at the 21st Century Public
Policy Institute and does not represent the view of Keidanren.

xvi

Toward a Comprehensive Solution for Nuclear
Policy and Business Challenges
Akihiro Sawa, Senior Executive Fellow
Sumiko Takeuchi, Deputy Project Leader of Nuclear Policy issues
The 21 st Century Public Policy Institute, Keidanren
Nov. 14th, 2013

1. Introduction to the issue
The accident at Tokyo Electric Power Company (TEPCO)’s Fukushima
Daiichi Nuclear Power Plant revealed that the conventional compensation
framework centered on the Act on Compensation for Nuclear Damages wasinsufficient in the event of grave and widespread nuclear disaster. With
this in mind, this paper will propose a new nuclear disaster response
system, encompassing a new compensation scheme as well as special
legislation for the restoration of the entire Fukushima area. It will propose
an integral framework to address accidents, and simultaneously discuss
how Japan should set the stage for the sustenance and continuity of
nuclear power operations (power generation and back-end operations)based on the contextual changes introduced below. The report will seek
strategies to manage the various risks (risks of accidents, enhanced
regulations, reduced operation rates, financing) associated with nuclear
operations from a comprehensive approach. The paper is not intended todebate the necessity of sustaining and continuing nuclear power inJapan’s energy policy, but to discuss the necessary measures in relation tothe operational context of nuclear power.
(1)

Historical context of nuclear power in Japan 1
First, we will briefly look back on the history of nuclear power

operations in Japan.
 (i) The introduction of nuclear power generation
Having experienced atomic bombing in Hiroshima and Nagasaki,
Japan embraced strong opposition against nuclear weapons in the
1 Details can be found in Toward the Establishment of a New Compensation System for

Nuclear Damages: a report by the 21st Century Public Policy Institute Nuclear Policy Issues
Committee (21st Century Public Policy Institute, 2013)1

post-World War II era, giving rise to various public campaigns. In the
meanwhile, the “Atoms for Peace”2 speech delivered by then US President
Dwight Eisenhower before the United States General Assembly on
December 18, 1953 suddenly shed light on the peaceful use of nuclear
power, mainly for generating electricity (and other uses including
agriculture and medicine).Indeed, acknowledging that the U.S. monopolyof nuclear technology having collapsed and the proliferation of nuclear
knowledge could no longer be controlled, the U.S apparently had strategic
intentions to prevent nuclear power from inducing change in theinternational military balance by entrusting an international organization
with the unified management of nuclear substances and limiting its use topeaceful purposes. Japan decided to take advantage of theopportunity

consequently granted non-nuclear nations including Japan to utilize
nuclear power..
Japan, in the midst of postwar reconstruction, was faced withburgeoning electricity demand in the context of high-speed growth. A
rising oil dependency rate and increased imports had concurrently
aroused concerns that trade balance constraints would cripple further
economic growth, and hence, the agendas of energy security and securing
an inexpensive and stable electricity supply needed to be addressed
urgently. Furthermore, the majority of public opinion was in support of theidea that Japan, having experienced atomic bombing, was in fact entitledto and even bore the mission to promote the peaceful use of nuclear power3.
Nuclear power may also have been underpinned by the notion that bymastering and controlling/employing the challenging state-of-the-art
technology Japan would be able to prove its high technology level to theworld. These circumstances advanced Japan towards adopting nuclear
power generation.
In 1955, the Atomic Energy Basic Act which provided legal grounds
for the peaceful use of nuclear power was adopted based on a joint
proposal by the Liberal Democratic Party (LDP) and the Socialist Party ofJapan (SPJ). This phenomenal event is an implication of the prevailing
optimistic mood that focused on the promising aspects of introducing2

http://aboutusa.japan.usembassy.gov/pdfs/wwwf-majordocs-peace.pdf

3 refer to, for example, Akihiro Yamamoto (2012), Kaku enerugi no sengoshi 1945-1960 “Hibaku

no kioku” to “Genshiryoku no yume” (Post-war history of nuclear energy 1945-1960: “memoriesof the atomic bomb” and “nuclear power dreams”), Jinbunshoin

2

nuclear energy. Historically renowned politicians such as LDP’s Yasuhiro
Nakasone and Matsutaro Shoriki and SPJ policy-makers Shigeyoshi
Matsumae and Shigeru Goto advocated the peaceful use of nuclear energy.
The Japan-U.S. Nuclear Cooperation Agreement was concluded thatsame year, followed by the Japan-U.K. Nuclear Cooperation Agreement in
1958, which laid the groundwork for transferring nuclear technology fromthe two countries. Upon concluding these agreements, Japan was required
to accept provisions which exempted the technology supplier from liability
in the event of accidents and to facilitate local acceptance of nuclear
facilities domestically. Hence, the Act on Compensation for Nuclear
Damages (“Nuclear Compensation Act”) was adopted in 1961. Politicians
were divided concerning how to promote nuclear operations. The
controversy

betweenpoliticians

who

supportedprivatesector-led

operations (Matsutaro Shoriki) and those in support of nationally-led
operations employing the Electric Power Developing Co., Ltd. (Ichiro Kono)
was politically resolved with the final decision being to advance nuclear
operations under private initiative (The Japan Atomic Power Company(JAPC)-model, co-financed by the nine electric power companies).4 This
event marked the dawn of operations “privately run under national policy.”
There was further debate over whether to introduce US technology or
UK technology first. British technology, which employed gas-graphite
reactors was initially introduced but was later replaced with American
light-water reactor technology due to various technical problems including
quake-resistance.5
 (ii) Period up to1990
Obligated to supply electricity under the Electric Business Act,
general electric utilities must keep appropriate generation capacity on

4 Tetsuo Arima (2008) Genpatsu, Shouriki, CIA Kimitsu bunsho de yomu shouwa rimenshi(Nuclear power plants, Shoriki, CIA: The inside history of the Showa era told in classified
documents) , Shincho books; Shigeru Goto (2012) Yukoku no genshiryoku tanjo hiwa (Theuntold story behind the creation of nuclear patriotism), Energy Forum books ( written by aformer SPJ lawmaker of the House of Representatives about the predawn of nuclear power inJapan); Junichiro Yamaoka (2011) Genpatsu to kenryoku (Nuclear power stations and power) ,Chikuma books; Makoto Sakata (2011) Denryoku to kokka (Electricity and national
government) , Shueisha books
5 Details can be found in Masatoshi Toyota (2008) Genshiryoku no rekishi to tenbo (Thehistory and future of nuclear power), Tokyo Tosho Shuppankai, p12-; Junichiro Yamaoka(2011) Genpatsu to kenryoku (Nuclear power stations and power) , Chikuma books, p86-3

reserve so that blackouts can be prevented during peak hours. A schemethat recovered equipment-related fixed cost was needed in order for
operators to make the investments required to maintain an operating
reserve. Hence, the following scheme was adopted under the post-war
systemembracingnine

privately-owned

generalelectric

utilities

established under the leadership of Yasuzaemon Matsunaga and GHQ.
Tariff regulations based on fully distributed cost (FDC) pricing and ageneral mortgage scheme that gave electric power companies an advantage
on issuing electric company bonds (general mortgage bonds which areissued under the Electric Business Act by nine electric utilities with the
exception of Okinawa Electric Power Company) 6 guaranteed companies
adequate revenue. Furthermore, regional monopoly ensured companies agiven amount of sales and market share. This business framework
stabilized the management of electric companies and therefore enabled
them to assume electric power operations as implementers of nationalenergy policy stable management. Hence, the business environment topromote nuclear power operations under private-public partnership wasestablished.
Nuclear power had been recognized as a necessity for Japan from thetime of its introduction, considering Japan’s need to hedge geopoliticalrisks as well as risks of surging fuel prices, due to its a low energy
self-sufficiency level. The agenda of developing and promoting the use ofalternative energy sources to replace oil was boosted to top policy priority
when Japan was struck by two oil crises in 1973 and 1979, thereby
accelerating the development of nuclear power generation. Furthermore,with the advancement of technologies to increase the fuel utilization
efficiency of uranium by extracting plutonium from spent fuel for domestic
reuse in fast-breeder reactors, Japan was determined to let nuclear powerassume the key role of “quasi-domestically produced energy” and strongly
promoted a “nuclear fuel cycle policy” centered on the reprocessing ofspent fuel and operating fast-breeder reactors. It had been commonly
understood among nuclear authorities that light-water reactors were not
Bonds (corporate bonds) which are secured by a mortgage upon the entire property of theissuing company and enable holders to obtain payment in preference to other creditors.
Electric company bond issue limits are set at a price two times higher than ordinary industry
bonds, and hence, electric company bonds represent a very high ratio of industrial bonds(comprising ordinary industrial bonds and electric company bonds) as a whole.

64the “ultimate reactor” but only a transitional technology, and that thepractical application of fast-breeder reactors would complete the nuclear
fuel cycle, thereby establishing consistency between nuclear technology
and policy. Once it was decided that provisions concerning the nuclear fuelcycle would be embodied in the 1968 Japan-U.S. Nuclear Cooperation
Agreement, the Power Reactor and Nuclear Fuel Development Corporation(PNC) was established in October 1967 as the research institution toadvance nuclear fuel cycle technology development. PNC consecutively
launched projects to build an advanced thermal reactor “Fugen” (Tsuruga
City, Fukui Prefecture, 1970) followed by an experimental fast-breeder
reactor, Joyo (Ooarai Town, Ibaraki Prefecture). (Fugen was shut down in2003 and awaits decommissioning; and Joyo has not operated after having
technical problems in 2007.) Furthermore, in 1971 it started building a
reprocessing plant in Tokai Village, Ibaraki Prefecture (fire accident in1997),

andfinallyin

1985, itbegan constructing

theprototypefast-breeder reactor, Monju.
In 1974, immediately after the First Oil Crisis, the Government
establishedtheSpecial

Account

forElectricPower

Development

Facilitation Measures which was funded by a special purpose tax, thepower source development tax, in order to facilitate the siting of nuclear
facilities. Various subsidies to support local governments hosting nuclear
facilities were later formulated under this scheme, encouraging theconstruction of many new light-water reactors from the 1970s to 80s andthereby pushing the share of nuclear power up to 30 percent of Japan’s
power generation portfolio.
 (iii) Beyond 1990 to present
In 1980, the nine electric utilities co-financed the establishment ofJapan Nuclear Fuel Services Co., Ltd. (currently, Japan Nuclear Fuel
Limited (JNFL)). Importing French technology, it began constructing the
reprocessing plant in Rokkasho Village in 1993. A year later in 1994, North
Korea’s withdrawal from the Nuclear Anti-proliferation Treaty (NPT)
marked the beginning of the Korean crisis. Subsequent negotiations led toagreement between the U.S. and North Korea that the U.S. would provide
small two light-water reactors with little risk of becoming a source of
nuclear proliferation, and the Korean Peninsula Energy Development
5

Organization (KEDO) was established to implement the agreed framework,
which ends in failure. In contrast, the new Japan-U.S. Nuclear
Cooperation Agreement which came into effect in 1988 made Japan the
only NPT non-nuclear weapon state to be granted comprehensive consent
to reprocess spent fuel (under a comprehensive agreement framework).
Japan is also expected to set a model for the peaceful use of plutonium
under the supervision of the International Atomic Energy Agency (IAEA).
Hence, the JNFL internationally bears an important responsibility in its
operations.
In the late 1990s, electric demand had been stagnated by the
prolonged economic recession following the burst of the economic bubble.
Under such economic circumstances, the Government’s economic policy
was centered on economic structural reform based on deregulation, which
would not leave the electric power sector untouched. As discussed later inthis report, electric deregulation policy is incompatible with nuclear power
policy, which entails massive initial investment as well as capital
investment requiring long-term funding, which have only been madepossible through stable revenue secured by measures such as tariff
regulations based on FDC pricing and regional monopoly that are to beabolished under a deregulated electric power system. Compared to otherenergy sources, nuclear power requires large initial investment (fixed
costs) and low fuel costs (variable costs), and hence, it has a highbreak-even point (requiring a high operation rate). Once the fixed costs arerecovered (after twelve years, or at the end of the depreciation period), it isgiven a cost advantage which results in high price competitiveness. If
fully-depreciated nuclear power plants are restarted, variable costs, which
are the equivalent of power generation costs, will be approximately 1
yen/kWh, giving nuclear power a overwhelming cost advantage over its
competitors, including of course renewable energy, the prices for whichhave been deliberately set high under the feed-in-tariff (FIT) system (thepurchase price for electricity generated at mega-solar power plants is 38
yen/kWh) and even thermal power, which is priced at approximately 10
yen/kWh. However, in the event that problems at a nuclear power plantleave it inoperative, it will have to be replaced by thermal power, which will
incur additional fuel costs (as well as depreciation costs if the fixed costs
have yet to be recovered). This will initially impose a great burden on the6management of electric power companies to eventually be recovered bypassing increased costs on to customers (and hence raising electricity
tariffs), consequently enlarging public burden.
Given popular belief that the economic recession would be protracted,
electricity demand had also been projected to decrease. Therefore, thepressing agenda had not been the construction of new nuclear power
plants but rather increasing the operation rate of existing reactors andaddressing issues related to their aging. These economic circumstances,accompanied by the stoppage of reactors due to operational problems andscandals, hindered the promotion of nuclear power generation which could
not exceed a thirty percent share of total power generated, even in thefavorable context of emerging climate change issues. Strong demands fromindustry to reduce costs in domestic infrastructure from the perspective ofcompetition against emerging economies resulted in the advancement of
the deregulation of the electric power system. In response, electric powercompanies accepted the deregulation of electricity sales to large-scaleindustrial customers and cut down drastically on capital investment intransmission

anddistribution

equipment.

Deregulation

measures

implemented in the context of competitive pressure are estimated to have
reduced electricity tariffs by over 5 trillion Japanese yen7. The efforts ofelectric power companies to promote “all-electric” buildings as a corporate
strategy for electricity demand expansion only resulted in limited
increases in competition for new customers in areas beyond theirrespective service areas.
Not subject to competition policy, the back-end of the nuclear fuelcycle was to be managed through a cost allocation system newly developed
under nuclear fuel cycle policy and integrally supported by the nineelectric power companies. After the enactment of the DesignatedRadioactive Waste Final Disposal Act in 2000, the Nuclear Waste
Management Organization of Japan (NUMO) was established as theimplementing entity for the disposal of radioactive waste to which electric
power companies (nuclear operators) would make annual payments.
Furthermore, the Japan Atomic Energy Commission (AEC) confirmed thelegal interpretation that the nine electric companies which were joint
Agency for Natural Resources and Energy, Denryoku system kaikaku to sono kouka(Overview and effects of electric power systems), May 2013, available at:www.enecho.meti.go.jp/info/committee/sougoubukai/3rd/3rd-3.pdf

7

7

shareholders (400 billion Japanese yen in capital) and joint guarantors (1trillion Japanese yen) of JNFL collectively supported Japan’s nuclear fuelcycle policy and were thus substantially obliged to reprocess all spent fuel8.
The 2005 Spent Nuclear Fuel Reprocessing Fund Act provided for electriccompanies to reserve monies to be used for spent fuel reprocessing
operations in a fund managed by a third-party fund administration
corporation (Radioactive Waste Management Funding and ResearchCenter (RWMC)). With the private sector shouldering the nuclear fuel cycle,
a national policy, it became more of an established fact that nuclear
operations were “privately run under national policy.”
As the business environment for nuclear power operations developed,
the Niigata-Chuetsu Earthquake stopped operations at Tokyo ElectricPower Company (TEPCO)’s Kashiwazaki-Kariwa Nuclear Power Plant, andTEPCO consequently posted a net loss of 150.1 billion Japanese yen on aconsolidated basis in March 2008. Increased thermal fuel costs and repair
costs led to a net loss of 84.5 billion in 2009, therefore revealing businessrisks related to operation rate drops at nuclear power plants.
Furthermore, the construction of JNFL’s reprocessing plant issignificantly delayed due to technical problems in the vitrification process
and may eventually induce the reconsideration of the nuclear fuel cycle
policy and increased fiscal burden on the part of electric power companies
should their spent fuel pools become full. If JNFL is unable toaccommodate spent fuel then it will risk cash-flow complications because
neglecting its promised services to electric power companies, it would not
be entitled to the monies reserved under the Designated Radioactive Waste
Final Disposal Act. Debt guarantors, as aforementioned, the nine electriccompanies might also be driven into financing difficulties.
Even if the reprocessing plant began operations and continued tosteadily operate, it is yet unclear whether the plant has the capacity toaccommodate the entire amount of spent fuel generated.9 There have been
8 Atomic Energy Commission, Eleventh meeting for the formulation of new plan, November

2004, Information document No.3, available at:www.aec.go.jp/jicst/NC/tyoki/sakutei2004/sakutei11/siryo3.pdf#/page=17
9 Refer to estimates by Hajimu Yamana, Research Reactor Institute, Kyoto University:

Hajimu Yamana, Kakunenryo cycle to genshiryoku seisaku (jo) – genjitukai ha saishori no iji
ni yoru kakubusshitsu no zouka youksei (The nuclear fuel cycle and nuclear policy (part1): therealistic answer lies in sustaining reprocessing operations to control increase of radioactive
material), web article available at: www.gepr.org/ja/contents/20121105-028

proposals in the past to build a second reprocessing plant which under thecurrent circumstances appear to be extremely infeasible. Against thisbackdrop, the current agenda is to rebuild a robust nuclear cycle policy
under which the amount of plutonium currently possessed is consistent
with the time horizon of reprocessing and plutonium use, on the premisesthat Japan will not possess plutonium in excess to amounts required for
power generation (excess plutonium stock) from the perspective of nuclear
non-proliferation: i) the feasibility of reprocessing all spent fuel, including
the 17,000 tons which have already been accumulated in the spent fuelpools at each nuclear power plant and the spent fuel which will be
generated at nuclear power plants that are likely to reinstate operations in
the future; ii) the management of the elemental plutonium that is
generated in overseas and domestic reprocessing; and iii) estimates of theamount of plutonium that will be consumed in the process of using MOX
fuel and the amount of spent MOX fuel that will be generated as a result.
This will require a review of the nuclear fuel cycle in terms of its economic
feasibility under current circumstances. Based on the conclusions of thereview, the cost allocation scheme between the private and public sectors
should be re-determined.
(2)

Current status of nuclear power
This section will discuss the significant changes that have occurredsince the TEPCO Fukushima Daiichi Nuclear Power Plant accident(“Fukushima accident”) in 2011.
 (i) Political change
The accident immediately triggered public disapproval against
nuclear power plants, suddenly increasing experts and politicians
supportive of centering energy policy on nuclear phase-out and promoting
renewable energy as an alternative energy source. In the meantime, thePrime Minister Naoto Kan requested that the Chubu Electric Power
Company’s Hamaoka Nuclear Power Plant be shut down in the absence oflegal grounds and that stress tests be conducted at other nuclear plants aswell, thereby undermining “the principle of rule of law” and creating
confusion in nuclear policy and nuclear power regulation. In September
2012, the “Innovative Strategy for Energy and the Environment” was9formulated. However, it failed to define a realistic thermal alternative tonuclear power and instead set out an unfeasibly high introduction rate forrenewable energy, in pursuit of the policy objective of a zero-nuclear powerin the 2030s, not having been able to abandon former Prime Minister
Yukio Hatoyama’s target of reducing greenhouse gases by 25 percent in2020. Therefore, the Cabinet adopted a decision to “implement theenvironment and energy policies while flexibly undertaking continual
assessment and review” and took the irregular approach of postponing thedecisionontheStrategy

itself.

Furthermore,

attempts

tomakeadjustments in the direction of abandoning the nuclear fuel cycle policy
caused the U.S. and Aomori Prefecture to express strong concern andobjection. Although the nuclear fuel cycle policy was maintained in the end,
the confusion has generated profound distrust among relevant parties.
When the Lower House election in December 2012 brought the rulingcoalition of the Liberal Democratic Party (LDP) and the New Komeito backinto power, it was decided that energy policy would be reconsidered with aclean slate. Despite high expectations that energy policy and electric power
policy would both resume their conventional pro-nuclear policy stance,
policy has not taken that large a turn back to its original form for various
reasons including structural changes in the diluting political support for
nuclear policy:
1) Anti-nuclear values have sustained over a long period of time and are
becoming entrenched in public opinion. The continuing unrest
regarding contaminated water issues even after two and a half years
since the accident has left public opinion unchanged;2) High expectations for nuclear technology and appreciation of it asstate-of-the-art technology which had prevailed at the time of nuclear
introduction

and

had

been

graduallyfadingwerecompletely

diminished in the Fukushima Daiichi accident. The confusion incommunications and lack of information in the aftermath of theaccident

have

arousedpublicdistrust

towards

thenational

government as well as nuclear operators;
3) Given receding memories of the oil crises, the public has become
insensitive to the need to quantitatively secure energy. The prolonged
economic recession has masked the importance of nuclear power
generation as a “cheap and abundant” energy source.
104) Although the victory of the LDP-New Komeito coalition in the recent
elections had been induced by such changes in public opinion,
partisans might not have been in support of their nuclear policy.
5) Few newly-elected Diet members and even mid-career LDP politicians
today have had any experience working with nuclear policy, comparedto the predawn of nuclear energy. In administrative bodies as well, anolder generation of bureaucrats who remember a time when strong
recognition of the need for nuclear policy was dominant are retiring
and will eventually be replaced by a younger generation whose firstencounter with nuclear policy was the TEPCO Fukushima accident.
6) Although the LDP’s coalition partner, the New Komeito, has exhibiteda certain degree of understanding towards the restarting of nuclear
plants, it is opposed to their new construction and replacement andlays more importance on renewable energy promotion policy.
7) As a result of a combination of the abovementioned reasons, nuclear
power has not been formally acknowledged to be “particularly”
necessary in terms of national interest and power (as well as local
development) since the TEPCO Fukushima accident.
These changes have not yet been recognized by the community 10 ofelectric power company executives and nuclear engineers who still believethat the nuclear policy paradigm is unchanged from the 1980s and 90s
andconstitutes

the

basic

notionsharedamong

politicians

andadministrators. As a result, they cannot understand why nuclear policy
has not made great advancements despite the substantial victory won by
the LDP-New Komeito coalition in both Upper and Lower House elections.
Therefore,

disturbing

administrative

anddiscrepancies

decision-making

betweenparties

the
and

ideas
privateheldbyoperators

regarding the restructuring of nuclear policy are likely to appear.
 (ii) Advancements in electric power reforms
A second significant change that has occurred since the TEPCO
Fukushima accident is the advancement of electric power system reforms.
The TEPCO Fukushima accident and the tsunami-induced damages tothermal power plants resulted in scheduled blackouts and revealed a lack
The term “nuclear village,” which is often used will not be used in this report because it is
not explicitly defined..
1011

of capacity for mutual provision of electricity between electric powercompanies, thereby exposing the flaws of the conventional power system.
Therefore, the ongoing electric power system reforms aim to shift from asystem where electric companies (general electric utilities) bear legal
obligations to supply power while being granted regional monopoly and
FDC pricing under the Electric Business Act to a system where supply anddemand are balanced in the market by deregulating electricity prices.
Such discussions on electricity system reforms have been continued in the
LDP-New Komeito administration and have evolved into deliberation onamending the Electric Business Act. Two important elements in relation
with nuclear policy are as undermentioned:
1) Legal unbundling (the separation of the transmission/distributionsector and generation sector)
The electric power sector is a typical infrastructure-oriented industry
with large electricity transmission and distribution assets. For example, atthe end of fiscal 2011, TEPCO’s fixed assets for electricity business were
7.4 trillion Japanese yen, 5 trillion Japanese yen of which transmission
and distribution assets accounted for. In contrast, nuclear power accounts
for only 0.7 trillion Japanese yen. Hence, the operating cash flow is“internally” generated by enormous depreciation costs of transmission anddistribution assets(Operating cash flow ѳ Revenue + Depreciation costs),

but with transmission and distribution assets no longer expanding andinfrastructure

renewaltobeconducted

relatively

automatically,

investment cash flow and operating cash flow are well-balanced.
On the other hand, when an electric power company possesses a
nuclear power plant, its construction is accompanied by a rapid increaseof investment cash outflow which cannot be equalized with inflow, relying
solely on the facility’s depreciation which takes as long as twelve years.
Nuclear power plants could be constructed and investment in safetymeasures

could

be

continued

becausethegenerationandtransmission/distribution sectors could mutually accommodate cash
under the conventional system of integrally managing power generationand transmission. If legal unbundling procedures advance into segment
accounting and separation of ownership without a fundamental review of
nuclear power policy, the financing available for nuclear power plants will
12

unmistakably reach its limits. Therefore, coordination is required between
power system reforms and nuclear power policy.
2) Abolishment of price regulations based on a fully-distributed cost
(FDC) pricing method, general mortgage bonds and regional monopoly
As aforementioned, in order to take advantage of the investments
made in nuclear power, electric power companies must take the risk ofrising interest-bearing debt ratios. However, precedents from overseas
have revealed that once deregulation progresses, the short-term recovery
of funds (investments with high discount rates) is preferred by financial
and capital markets. Hence, investment has been concentrated in naturalgas, and if Japan can import inexpensive shale gas, gas-fired thermal
power plants will become the most attractive investment destination in
Japan as well.
The risks related with financing nuclear power had been minimized
by a system that involved price regulations based on a FDC pricing method,
the issuance of electric company bonds with general mortgage and regionalmonopoly which increased the guaranteed amount of sales. However, as
developments are made in electric power system reforms, policy-based
guarantees will no longer be available for electric power companies,
thereby making it difficult for them to procure investment funds toconstruct new nuclear power plants or to replace aged plants on thepreferable terms that they are used to. Some studies state that projects forconstructing new nuclear power plants have been stalled after theelectricity market was fully deregulated in the U.S. and Europe. Japan will
also inevitably be faced with uncertainty regarding its capacity to sustain
nuclear power operations in the future.
While

nuclear

power

has

been

driveninto

suchdifficultcircumstances, renewable energy has enjoyed intensive policy protection
to support the promotion of its diffusion and expansion. Under afeed-in-tariff (FIT) program, the price of electricity bought by generalelectricity utilities from renewable energy operators is determined basedon estimates provided by the Procurement Price Calculation Committee
instead of in the market, ultimately amounting to FDC pricing. Hence, it isreasonable to state that despite its high generation costs and marginal
supply capacity, renewable energy has been granted such intensive
13

guarantee of business financing because of its newly acknowledged status
as an energy source promoted under national policy that can contribute togreenhouse gas reduction and replace nuclear energy as well.
The abovementioned structural changes which are occurring as aresult of electric power system reforms are illustrated in Figure 1.

(Critical for energy security and climate change)义Stable supply乊

1DWLRQDOSROLF\
Nuclear power

FDC pricing / general mortgage bonds

Abolished in deregulation process

Renewables

Feed-in-tariff:KLFKZD\IRUQXFOHDUSRZHU‫ء‬Judgment of “specialness”

义 0DUNHWPHFKDQLVP GHUHJXODWLRQ
LNG

Coal

Petroleum

Unstable supply

6HFXUHILQDQFLQJ ,QVHFXUHILQDQFLQJ

6WUXFWXUHRILVVXH

Nuclear power乊Source: compiled by author

Figure 1 Structure of issue (iii) Regulatory activities and technological innovation
Investments for safety should indeed be prioritized and a systemshould be designed to guarantee the introduction of safety measures basedon the most recent findings. However, after the Fukushima accident,
business risks havecometo involve

theimpairing of long-term

investments due to the application of retroactive rules and standards thatwere not effective when a nuclear plant was initially licensed to operate.
Such risks of policy change are also important emerging factors for14

investment decisions. The regulatory activities of the newly established
Nuclear Regulation Authority (NRA) should facilitate the autonomous
efforts of nuclear operators to engage in safety measures and inspire
further technological innovation. However, the regulatory activities of the
new organization are also too intensively infrastructure-oriented and takeaconventional

approachtowards

severeaccidents.

Therefore,bydemanding the “strict independence” of each layer of “defense-in-depth,”
they have inversely undermined “independent effectiveness11.”
The regulatory activities of the U.S. Nuclear Regulatory Commission(NRC) are concentrated on critical risks and take a performance-based
approach (ROP; to be discussed later in this report) which considers
fundamentally safe plants to have high operation rates. It has therefore
been successful in encouraging nuclear operators to engage in safetymeasures and technological innovation.
Other factors are also required of nuclear regulations. The current
regulatory activities lack a sense of “efficiency,” which will be an
indispensable factor in the face of the difficult financing environment to becreated by electric power system reforms. The Fukushima accident
shattered the “myth of nuclear safety” and revealed that nuclear power was
no exception of the fact that all technologies and systems intrinsicallyembody risks. Future challenges regarding regulations on the use of
nuclear technologies lie not in how to eliminate risks but how to balance
the strength of measures to reduce risk and the degree of cost and risk
reductions to be achieved. This is the equivalent of “efficiency,” one of the
NRC Principles of Good Regulation, which also include independence,
openness, clarity, and reliability. The agency states that the “taxpayer, therate-paying consumer, and licensees are all entitled to the best possible
management and administration of regulatory activities,” that “regulatory
activities should be consistent with the degree of risk reduction they
achieve,” and that “where several effective alternatives are available, theoption which minimizes the use of resources should be adopted.”
Based on this principle, under the U.S. backfit rule, the NRC will
require the immediate backfitting of a facility without consideration of thecosts incurred if it determines that “such regulatory action is necessary to
11 e.g. presentation given by Koji Okamoto, professor at the Graduate School of Frontier

Sciences, University of Tokyo, at the Denki Shimbun Editorial Forum on August 19, 201315

ensure that the facility provides adequate protection to the health andsafety of the public.” If this is not the case, the NRC will judge the necessityof the backfitting by comparing the costs required for modifications andadditional investments with the advantages of increased safety.
Despite the lesson learned that ”there is no such thing as zero-risk,”public opinion has inversely continued to call for zero-risk in light of therestarting of nuclear power plants. The NRA has sided with such trends by“standing on the safe side in case of grayness.” Considering the social
context after the Fukushima accident, it is highly understandable thatsuch management was necessary.
However, it should not be forgotten that the NRA’s fundamental
mission is to fully employ nuclear power plants, which are “assets” of allelectricity consumers by taking appropriate measures according to risk inorder to control safety risks below acceptable levels. The NRA should
review its regulatory activities for assurance that it has not been obsessedwith the zero-risk curse.
(3)

Requirements for sustaining nuclear power
Based on the abovementioned understanding of the status quo, thissection will provide a summary of the requirements for sustaining andfurther developing nuclear operations.
(i) First requirement: political confirmation of the “special

importance” of nuclear power
This report will not discuss the necessity of nuclear power in energy
policy or any other policy area in a wider context as it aims to seek whatkind of scheme should be formulated to set up the environment to facilitate
safe nuclear operations on the premises that they are necessary. However,as discussed in Chapter 1, Section (2) (Current status of nuclear power),
public opinion and politics have become undecided about the necessity of
nuclear power itself. The necessity and therefore its “special importance”
must be discussed in a different forum, the conclusion of which must be
documented at a higher political level. The national government should
reconfirm its commitment to nuclear policy by means of the Basic Energy
Plan and other Cabinet decisions from an administrative perspective, andin the form of party decisions adopted by the ruling party in political terms
16

in order to lay the groundwork for future system reforms and theestablishment of relevant budgets. Both decisions must be approved by
the Diet.
Various reasons can be provided to explain why nuclear power isneeded. In addition to conventional arguments that it is essential forestablishing energy security, securing an inexpensive and stable electric
power supply (for both household and industrial use), and contributing to
the prevention of climate change, it importantly contributes to developing
countries by providing a breakthrough for their energy issues and to theworld by setting a model for the peaceful use of nuclear material by anon-nuclear weapon state in the context of nuclear non-proliferation. The
nuclear environment has drastically changed both domestically andoverseas since the 1950s. The role of nuclear power should be discussed in
the wider context of Japan today and in the future.
Policy-makers bear the responsibility to explain not only thenecessity of nuclear power as an electric power source but also how the
public will benefit from the advantages of sustaining nuclear technology
and relevant human resources. As later discussed, if nuclear policy is to besteered in the direction of stronger national government intervention in theprocess of reviewing and reconstructing nuclear power operations,
responsible government assurance that the benefits of using nuclear
power will be enjoyed not only by nuclear operators but also by the generalpublic will serve as the rationale behind the policy.
 (ii) Second requirement: establishment of a secure financing
environment
As discussed in the subsection regarding electric power reforms, an
important

key in financing nuclear power is the risk level that can beaccommodated by financial institutions and the capital market inproviding the large-scale, long-term funds required for nuclear power
generation in light of the abolishment of FDC-based price regulations andother measures that had conventionally provided a secure financing
environment as well as higher uncertainties in future operation rates due
to tightened regulations. When legal unbundling advances and electric
power companies are reorganized into holding companies and groupsubsidiaries, another critical judgment factor for financial institutions in
17

financing nuclear power would be how the assets of nuclear power plants
will be divided, how cash flow is managed within the corporate group and if
financing can be provided to the group instead of to individual companies.
Details of the system reforms that will largely affect the financing
environment for electric power companies are yet to be discussed within
the government. Potential impacts on financing have not been adequately
addressed in past discussions but must be considered in the broad context
of system reforms and a framework for nuclear operations, regardless ofwhether or not electric power system reform issues have been intentionallydiscussed separately from financing issues.


(iii)

Third

requirement;

regulatory

activities

tofacilitate

technological innovation
The NRA being a newly established agency, it may be too early to
discuss its regulatory activities, but there is a need to fundamentally
review the Act on the Regulation of Nuclear Source Material. Nuclear Fuel
Material and Reactors (“Nuclear Reactor Regulation Law”) in terms ofregulatory standards, methods and activities in order to advance humanresources development and technological succession while encouraging
self-governed competition for improving safety beyond legal obligation
among companies in the middle- to long-term as well as incorporating newtechnological innovations. If the Nuclear Reactor Regulation Law and the
NRA are to specialize in regulating nuclear safety, then the current Nuclear
Reactor Regulation Law, which covers a mixture of operational regulations
and safety regulations should be fundamentally restructured from theviewpoint of nuclear material management and securing flexibility innuclear operations 12.
Measures to limit the life of nuclear reactors to forty years should also
be verified whether they are based on sound scientific grounds and if they
really encourage higher safety levels as well as technological development
and innovation. Furthermore, standards and procedures for extensions
beyond forty years will not only significantly affect the cash flow of anelectric power company but also business decisions regarding the

12 relevant proposals can be found in Tomoyuki Tanabe, Genshiryoku houkisei no taikei(Framework of nuclear-related laws and regulations), ed. Keiji Kanda, Yoshihiro Nakagomi,
Genshiryoku seisakugaku (Nuclear policy studies), 200918

decommissioning and replacement of nuclear power plants. The new
Nuclear Reactor Regulation Law, a lawmaker-initiated legislation, has notbeen exposed to sufficient deliberation among experts and therefore fails to
address such critical legal elements.
The Nuclear Regulation Authority (NRA) was established as a strongly
independent government committee, or an Article 3 committee, under thename of “separation of nuclear regulation and promotion,” while theAtomic Energy Commission of Japan (AEC) which has been responsible fornuclear promotion is headed toward major functional downsizing. The
check-and-balance system of nuclear administration can only take rootwhen regulations and promotion measures are balanced, but recent trends
are likely to lead to regulation-oriented nuclear policy. Limiting thefunctions of the AEC, which has supported the peaceful use of nuclear
energy in Japan as “the guardian of peaceful nuclear use,” together withthe exposure of the domestic “excess plutonium stock” issue, is bound tocommunicate an extremely negative message to the world. If this adversely
affects the extension of the Japan-US Nuclear Cooperation Agreement in
2018, the implementation of nuclear policy and operations (reprocessing
operations, in particular), which has been founded on the framework of theAgreement, will become increasingly difficult. Therefore, discussions
regarding the structure and functions of an administrative body to oversee
nuclear administration need to be reinitiated from blueprint.
For these abovementioned reasons, a review of the regulatory
activities of the NRA and the Nuclear Reactor Regulation Law in which they
are stipulated are urgently called for as a prerequisite for the sustenanceof nuclear power.
19

2. Policy proposal for laying the groundwork for nuclear power
Based on a shared understanding of the current situation of nuclear
power, this section will propose a comprehensive policy package to sustain
nuclear operations in the future. It is important that the national
government’s commitment to nuclear power is reconfirmed both politicallyand administratively, by bundling the Basic Energy Plan and its
implementation plan and relevant provisions in new and existing laws into
the form of a bill on the Management of the Operational Context of Nuclear
Power. Furthermore, the policy must be implemented based on a long-termplan designed by a responsible government body widely known to the
public as nuclear power requires very large fixed asset investment. The
AEC would assume the role of such the government body under thecurrent framework, but if it is to be abolished, a new administrative bodyto replace it must be established.
Now that the myth of zero-risk nuclear safety has been shattered,public relations have become an important essence of reestablishing
public confidence in nuclear power. The issue of who should bear the roleof communicating what kind of information to which audience must be
carefully

addressed

ascontinuing

conventional

methods

led

byprivate-public initiative will only emphasize lack of remorse or insensitivity
to theFukushima accident. Renewed politicaland administrative

commitment to nuclear energy should be premised upon the fostering ofdeep public understanding of the advantages and disadvantages as well as
the significance of continuing the peaceful use of nuclear power. The
contents

andperspectives

of

the

information

communicated,

communication methods and new media should also be considered.
One of the most critical challenges for the immediate future is
resolving the discrepancies between the understanding shared amongresidents of local governments which have hosted the siting of nuclear
facilities who take pride in the important role they have played insupporting national energy policy and the perceptions regarding nuclear
power issues held by the public in major power consumption areas, thedestinationofelectric

power

supplyservicesoriginating

in

the

abovementioned local governments. This would also be premised upon aclarification of the position of nuclear power in the electric power reforms.
A government body specializing in providing information and facilitating20

mutual communication should be established. The U.S. Nuclear Energy
Institute (NEI) could be thoroughly studied as a promising model.
(1)

Basic structure
The proposed policy package is illustrated in Figure 2 (TEPCO’s

position requires separate consideration and will not be elaborated herein.
Structural aspects have been written out in the figure.)
Mutually-related
Amendment to Nuclear Compensation Act(=limited liability or ceiling on indemnification)
Diversification of risk financing techniques
inlcuding e.g. reinsurance by government

Replacements
䋨incl. new installments䋩

policy-design䋺New institutions

Rationalization of regulatory activities ofRegulation Authority(=amendment to Nuclear Reactor Regulation Law)

Private sector capital market

Private investment

Safety improvements and maintenance oftechnology and human resource basethrough new investments andconstruction (including exports)

䋺Existing institutions

Government-supported loan guarantees,
strike price system and the like in the case of
deregulation (abolishment of FDC pricing andgeneral mortgage bonds)

R&D funds / operation funds

Public funds / public financial institution(Special account for power sources development /industrial investment account)Back-end Policy Headquarters
Nuclearpower
plants ingeneralHighly-aged
reactors,
nuclearpower plants
unsuitable forbackfitting(public-private committee / implementation body)
Adjustingaccounting rules topromotedecommissioning

Decommissioning
management company
Abnormal
Normaldecommissioning decommissioning

8 electric power companies

Decommissioning

Middle- to long-termbusiness options

Special company for nuclear
power established by law
䊶Joint private or public-private capital
investment
䊶Ideas for simultaneous establishment ofbody for international operations

Decomissioning
body
Middle- tolong-termbusiness
options

Fukushima Daiichi(#1)
䋨reactors 1-4䋩Kashiwazaki-kariwa
Fukushima Daini(#2)
Nuclear plants

Recyclable-Fuel
Storage
Company
InterimStorage

Japan
Nuclear
Fuel
LimitedReprocessing

NUMO
Final
disposal

Cross-cutting
researchfunctions(from JAEA)

Research

Implementing body to be initially assumed by TEPCO(incl. as subsidiary)

Indemnification
debts

Transmission/
distributionsector

Generation
sector䊶䊶䊶䊶

TEPCO䋨Јholding company䋩
Source: compiled by author

Figure 2 Framework for comprehensive resolution for nuclear issues(Act on the Management of the Operational Context of Nuclear Power)

 (i) Clarifying the role of nuclear power in the electric power system
reforms
As aforementioned in Chapter 1, Section (2) (ii), the ultimate goal ofelectric power system reforms is market deregulation which will involve theabolishment of tariff regulations based on FDC pricing, electric company
bonds with general mortgage and regional monopoly13. It must be clarified
13 The following papers were referred to regarding “missing money” resulting from the

deregulation of the electric power system: Ryuzo Yamamoto, Naoki Toda, Denryoku shijo ga

21whether nuclear power will be entitled to policy support as “utility power
plants” under national policy as in the case of renewable energy is or if itwill be determined, like thermal power, merchant power plants exposed tomarketcompetition

which

will

be

subject

only

tolimitedandcomplementary market-friendly support measures, if any, to minimize
market-distorting effects. This is important for electric power companies inmaking decisions on how they will address nuclear power in their businessstructure and how they will invest in nuclear operations through whichmeans of financing. Procedural transparency is also required of the newframework in terms of who will decide whether a nuclear facility is a utility
or a merchant power plant– will the national government decide (by law),

will nuclear operators be granted the choice, or will the government andnuclear operators be left to negotiate agreements for each reactor or site inaccordancewithpolitical

factors,

historicalcontext

andcurrent

circumstances?
 (ii) Private sector-led replacement of aged reactors
The authors consider it essential to maintain a certain ratio of
nuclear power generation in order to achieve the goals of energy policy,
namely, energy security, maintaining inexpensive energy prices andaddressing climate change issues. In order to achieve these policy goals,
the “replacement” (including new installments in the middle- to long-term)of aged nuclear reactors through private initiative must be promoted basedon the premise that safety has been secured. Therefore, a scheme to covervarious financing-related risks is required. It is important that revisions of
the Nuclear Compensation Act, the advancement of electric power reforms(see subsection (iii))), and the formulation of a government back-up
scheme for nuclear operation-related risks are discussed in this context.
Relevant risks include risk of accident, risk of ex-post policy or regulatorychanges and risks related to the stoppage of back-end operations.14
Furthermore, given the positive acceleration of nuclear power
denryoku busoku wo maneku, missing money mondai (koteihi kaishu busoku mondai) ni dou
torikumuka (The electricity market to create power shortage: addressing the missing money(unrecovered fixed costs) issue), International Environmental Economic Institute discussion
paper, 201314 Details can be found in: Toward the Establishment of a New Compensation System for

Nuclear Damages: a report by the 21st Century Public Policy Institute Nuclear Policy Issues
Committee , 21st Century Public Policy Institute, 201322

developmentinemerging

economies 15 ,

Japan

can

make

major

contributions to securing nuclear safety in Japan and the world byretaining and improving the nuclear power plant technologies possessedby Japanese manufacturers and operational know-how of electric powercompanies. To assure the retention and succession of nuclear technologies
and human resources required for such contributions, the international
expansion of nuclear operators should be proactively encouraged, while
domestically promoting the replacement of aged reactors. Although fewer
competent university students are interested in pursuing nuclear studies
today, the expansion of international projects could bring an end to such
trends. Knowhow and knowledge obtained through actual involvement in
the construction work at nuclear power plant sites are also indispensible
for the improvement of safety at domestic nuclear power plants. An
implementing body not confined to the business framework of existing
entities should be fostered to address international projects in acomprehensive and focused manner.
Overseas companies could also become involved in Japan’s nuclear
operations. Under a limited liability scheme such as the one proposed
herein, in Chapter 2, Section (2) (iii) 1), limited risk may attract investment
in domestic nuclear power operations from overseas operators, as seen in
the examples of investments by EDF and a Russian electric powercompany in the U.K., once market deregulation advances. Japan must
decide whether it will enthusiastically accept foreign investment or if legal
measures will be implemented to restrict it.
 (iii) National government-led approaches to back-end issues
Japan must redeem both domestic and overseas confidence in its
nuclear fuel cycle policy which was lost under the Democratic Party ofJapan (DPJ) administration. Apart from the economic efficiency of nuclear
power (fast-breeder reactor), it

must

take

into

consideration

thesignificance of reducing radioactive waste volume and related costs as wellas transmuting long-lived nuclides, and also Japan’s role as a successfulmodel for peaceful use and management of plutonium under the complete
supervision of the IAEA as plutonium management will become a serious
According to the Japan Atomic Industrial Forum, Inc. (JAIC), 76 nuclear power reactors areunder construction and 97 reactors are at the planning stage worldwide as of January 1, 2013.
(www.jaif.or.jp/ja/joho/press-kit_world_npp.pdf)
15

23

issue as nuclear development evolves in emerging economies. In order tofulfill its policy of not possessing “excess plutonium stock,” the agenda for
nuclear back-end policy deliberations must encompass MOX fuel use forthe immediate future, the operation of Monju, whose utilization is also
being considered for studies on technologies to burn long-lived nuclides,
and the compilation and management of the data collected from operating
Monju. Research functions regarding the safety of the nuclear fuel cycle
should be allocated to the appropriate institution in these deliberations.
We suggest that the government (a “Back-end Policy Headquarters,” to be
discussed hereinbelow) formulate a policy roadmap for fast-breeder
reactor development including the next step beyond Monju based on all of
the abovementioned factors.
In order to facilitate the replacement of aged reactors, a policy
framework should be designed to enable nuclear operators to make early
decisions on the decommissioning of reactors whose continued operations
are no longer economically efficient. Increased government involvement isrequired in decision-making and financing nuclear back-end operations asawhole.

The

government

shouldbear

increasedsupervising

responsibilities for the back-end process from decommissioning to thegeological disposal of high-level radioactive waste, while the private sector,
drawing on its technological and operational know-how, assumes
implementation responsibilities.
Thus, it is important to efficiently promote integrated efforts toimplement nuclear back-end policy and operations as different bodies
have

conventionallybeen

responsibleforimplementation

anddecision-making. With the NRA’s functions weakened, a new body must be
established within the government to assume its original role ofcomprehensively reviewing nuclear back-end policy; otherwise, theattribution of responsibility for the planning and implementation ofnational nuclear back-end policy will remain ambiguous. If policy isspontaneously determined, then public confidence in the government’s
back-end policy will become increasingly undermined.
These issues can be overcome by establishing a “Back-end Policy
Headquarters” (Chief of Headquarters: the Prime Minister; Deputy Chief ofHeadquarters: Minister of Economy Trade and Infrastructure and theMinster of Education, Culture, Sports, Science and Technology) directly24under the Cabinet (Cabinet Office or Cabinet Secretariat) as anadministrative body that will oversee the planning and drafting of nuclear
back-end policy and assume the final responsibility of implementation.
Another organization should be jointly established under public-private
cooperation with the mission of coordinating the scale and progress ofoperations

at

each

stage

of

the

nuclearback-end

processfromdecommissioning (including abnormal decommissioning) to final disposal.
 (iv) Rational Regulations by the Nuclear Regulation Authority
The NRA would be unnecessary if Japan were to abandon nuclear
power. Nuclear power could be phased out both legally and politically byother means. The NRA has been retained out of expectations that it will
deliberate and implement the safety regulation standards and activities
required to safely operate nuclear power generation facilities, which areeconomic assets made possible by large investments burdened by thegeneral public and electricity consumers, and to provide the national
economy with an inexpensive and stable energy supply.
The NRA, as exhibited in the debate regarding active fault issues,neglect engaging electric power companies, the licensees, in deliberations
and almost seem to steer discussions only for the purpose of finding
reasons not to restart nuclear operations. This attitude is implied in the
NRA report which acknowledged the fracture zone at the JAPC Tsuruga
Nuclear Power Plant to be an active fault. 16 However, given a legal
framework which, under the Nuclear Reactor Regulation Law and the Act
for Establishment of the Nuclear Regulation Authority, seem only todemand “implementing measures necessary for ensuring safety in the useof nuclear energy,” there is little meaning in criticizing the attitude of the
Authority, more less individual members.
The following three elements are required for the sound improvementof regulation related to the use of nuclear technology:
1) The general public as well as regulators and the regulated shouldshare the acknowledgement that the safety standards established by
the NRA are only requirements for approval of nuclear power
16 Refer to Akihiro Sawa (2013) Denryoku gaisha, Kokumin no futan wo saishogen ni suru

hairyomo – gensiryoku iinkai no arikata e no teigen (Minimizing the burden on electric powercompanies and the general public: a proposal on the role of the Nuclear Regulation Authority),
Energy Forum , August 201325

operations and that they are not evidence of the safety of a nuclear
power plants. A scheme embedding incentives to promote safety
improvements through competition among operators should bedesigned.
2) The regulatory activities of the NRA should no longer be focused on
designing hardware structure and checking for document flaws but
should instead be shifted to assessing integrated risks, includingorganizational governance and human factors, and securing thehuman resources required for such activities in terms of both
quality and quantity.
3) In order for thorough engineering technology-oriented deliberation
regarding safety standards and regulatory methods to take place
between the NRA and operators, efforts should be made on bothsides: the NRA should enhance its staff functions by establishing aSpecial Committee on Technology, and operators should establish
an organization for the compilation of expertise and know-how fromoperators and manufacturers and serve as a liaison for opinion
exchange with the NRA.
Furthermore, the NRA has other critical tasks, which are equally as
important as conformity assessments for backfit requirements andfracture zone surveys. These include the collection and announcement ofscientific information on low-dose exposure and support for formulating
regional disaster prevention plans.
In order to reinstate public trust in nuclear power, the reconstructionof Fukushima and the development of safety measures based on thepremise that zero-risk is unachievable are essential. New safety standards
focused on severe accident management have been formulated. This isevidence of deviance from the myth of zero-risk nuclear safety which is a
step forward.
However, it is unfortunate that fear of radiation exposure has takenroot in the wide public, as a result of increasing distrust towards thegovernment for the constant changes made to its decontamination
standards and food safety standards as well as the spread of scientificallyinvalid information after the Fukushima accident. Several different
agencies had supervised radiation management, regarding which the NRA
26

currently has comprehensive authority. NRA Chairman Shunichi Tanaka
is an expert of this field. Two years ago government deliberations on low
dose exposure were compiled into a report presenting highly objective
scientific information but failed to improve public understanding of theissue 17 . With even the most reliable mass media sources persistently
providing information based on unscientific grounds, it would be morereassuring for the public if the NRA, which takes a skeptical stancetowards nuclear power, were to address low dose exposure issues. This
could be the way forward in reinstating public confidence in nuclear
power.
Another major role that the current NRA must assume is supporting
inexperienced local governments by providing them with expertise
regarding the formulation of a disaster prevention plan in preparation of a
nuclear accident. With a view to restarting nuclear power plants, the NRA
should proactively make an effort to explain to local governments the
judgment made in conformity assessments and to address the challenges
discussed herein.
 (v) Special legislation for the reconstruction of Fukushima
A critical challenge – almost a prerequisite - in pursuing thecomprehensive nuclear measures abovementioned is the restoration of
local communities that were destroyed in the Fukushima accident andrehabilitation of livelihoods lost.
Concrete measures should be discussed based on careful judgment of
which measures are the most realistic and effective in view of the situation
faced by the affected local community and the future of the victims’
livelihoods. Creative ideas should be put on the table based on anunderstanding of the local reality and consideration of the following
factors:1) Decontamination standards
2) Forms of compensation and reimbursement negotiations
3) Infrastructure reconstruction plans by evacuation instruction area
4) Measures to create employment opportunities
5) Structure of the rehabilitation body
Cabinet Office (2011) Report㧦Working Group on Risk Management of Low-dose Radiation
Exposure , available at: www.cas.go.jp/jp/genpatsujiko/info/twg/111222a.pdf (English version

17

available at: www.cas.go.jp/jp/genpatsujiko/info/twg/Working_Group_Report.pdf)

27

The rehabilitation of Fukushima involves a close mixture of theabovementioned factors and therefore requires the mapping out of
integrated measures taking a comprehensive approach towards them.
Administrative bodies need to realize that comprehensive measuresembracing the organic relationship between the factors are required
instead of segmental optimization of individual factors. Based on that
understanding, special legislation on establishing a comprehensive policy
framework should be adopted to prevent individual issues such as
decontamination from being addressed separately. For example, as
property damage compensation progresses, a scheme which enables thecomprehensive use of real estate for local rehabilitation purposes may benecessary so that when the ownership of property is transferred from thevictim to the party liable, and from the party liable to the national
government (possibly without compensation, that is, in the form ofdonation), the land may be used to create new communities.
A

Fukushima

Rehabilitation

PublicCorporation

shouldbeestablished for the long-term and comprehensive implementation ofrehabilitation projects. The Corporation should secure human resourcesfrom both private and public sectors to work under long-term employment
conditions and assume decontamination activities, local development
projects including urban planning, project management functions forinfrastructure improvement and other projects. The Corporation may also
be granted the authority to formulate an overall funding allocation plan sothat monies collected from the national government, local government andTEPCO are not randomly used.
(2)

Policy proposals for individual issues

 (i) Replacement and financing risk issues
Once political and administrative support is gained towards thereplacement of aged reactors (including new installments in the long term),
the next challenge will be covering risks accompanying financing for new
investments.

From

the

perspective

thatlight-water

reactorsarecommercially viable, a majority of the monies required should be procured
from the capital market or from private financial institutions. This
subsection will discuss the policy measures required for stable financing
28

under a deregulated electric power system.
Some or all replacements and new installments could be given policy
importance by prescribing them in an Important Nuclear Power Source
Development Plan stipulated in the proposed Act on the Management of
the Operational Context of Nuclear Power. This would serve as legal
grounds for implementing the undermentioned measures to recover funds
for those plants approved by the government. For example, replaced
reactors

and

those

bearinghighpolitical

significance

could

be

distinguished from existing reactors by designating them “public benefit
power sources” (utility power plants), while the latter would be merchantor competitive power sources. The public or competitive character of areactor would be determined based on its political significance in terms ofenergy security policy, securing a stable local supply of electricity, climatechange measures, and plutonium management or the involvement ofbusiness expectations towards it as a source of revenue.
1) Retaining nuclear power as “public benefit power source” under national
policyConsidering the large-scale and long-term financing required to cover
initial costs, in order to ensure the recovery of fixed assets, the following
schemes are suggested: a) a debt guarantee scheme backed by the national
government (or other public institutions with equivalent credibility); b) a
strike price system, also referred to as a “nuclear feed-in-tariff system”(recently

adoptedintheU.K.);

andc)contracts

betweentransmission/distribution companies or the wholesale electric power
exchange and an electric power company that seeks to operate a utility
power plant under which the former assumes operation rate risks bypaying the latter a standard tariff for the constant supply of a fixed amountof electricity (JNFL model).
2) Newly designating nuclear power to be merchant power
A framework will be needed to allow companies to capitalize lostearnings that have become unrecoverable as a result of regulatory changes,
including those regarding safety regulations, and to recover the stranded
costs from wheeling charges. Under a deregulated electric power system, a
policy support measure such as a debt guarantee scheme, as described29

above in the previous subsection, may be necessary even for commercial
power plants.

3) Restructuring nuclear operations
Furthermore, as the debate on unbundling power generation anddistribution develops and details of the new system are designed, decisions
will bemadewhether a holding company canassumefinancialmanagement and financing for the group as a whole under a legal
unbundling model. (According to the report 18 compiled by the Expert
Committee on Electric Power System Reforms under the Ministry of
Economy, Trade and Industry (METI), this will be possible.) In the eventthat financing must be addressed by individual subsidiaries, nuclear
power operations will be integrated into electric power companies withtechnology, human resources and financial resources or conducted undera joint business established by nuclear operators. (see “options” on thelower left in Figure 2)
In the event that the restructuring of nuclear power operations isinevitable, the following factors must be comprehensively considered inorder to find the optimal design.
a) Reactor model, current status of location;b)

Technologicallevel,

relationshipwithsubcontractors

andmanufacturersc) Leveling of cash flow by combining investments with different
payback periods;d) Status of fuel and spent fuel; ande) Vision for international business expansion.
If nuclear power operations areforced to undergo businessrestructuring, the government will be required to consider providing thefollowing support measures:a) Provision of funds entailed for restructuring (capital investments,
debt guarantees, etc.);
b)
18

Tax

incentives(registration

andlicensetax

exemptions,

Ministry of Economy, Trade and Industry, Report of the Expert Committee on ElectricPower System Reforms, available at:www.meti.go.jp/committee/sougouenergy/sougou/denryoku_system_kaikaku/pdf/report_002_0
1.pdf

30

aggregation of profit and loss);c) Clarifying its approach to the abovementioned stranded costs;
d)takingAntimonopoly

clarificationofAct-related

requirements,

measuresaccelerationof(exemption,
investigation

procedures, etc.); ande)Retaining

operatinglicensesissuedaccordingtosafetyregulations and accelerating other licensing procedures underrelevant laws.
 (ii) Back-end issues
The back-end issue, which has become the largest impediment to thesustenance and continuity of nuclear power generation must be addressedby the national government with more proactive responsibility. The
government is required to perform its role of implementing policies and be
responsible for the processing of spent fuels through to final disposal.
Therefore, we propose the following options as mechanisms to coordinate
the scale and progress of operations at each stage of the nuclear back-end
process, based on a basic policy to be set out by government’s Back-end
Policy Headquarters.
a. Establishing an “Organization for Nuclear Back-end Operations,” aspecially-approved corporate body or special company established bylaw
The coordinating body proposed herein is a permanent entity
explicitly ensuring the continuity of policy and accountable management,
but with inherent risks of potential inefficiency, as often observed ingovernment

corporations.

The

government

share

in

capitalorcontributions would require further consideration – the government
could have a 100% share (contribution government bonds will require no
additional burden) or be granted a golden share; or, the government
could hold a two-third share and electric power companies a one-third
share, in which case the assessment of contributions in-kind or transfer
of assets from electric power companies will have to be determined.
Nevertheless, in light of the purpose of the establishment of theOrganization for Nuclear Back-end Operations, the government would
take the initiative. Decisions must be made to determine details of its
31

operational management structure, including making business plans
and the appointment of executives subject to approval by the governing
minister (the Prime Minister, the Chief of Headquarters of the Back-end
Policy Headquarters).
b. Joint Committee for Public-Private Coordination of Nuclear Back-end
Operations
As interim storage and reprocessing are currently operated by theprivate sector, drastic change to conventional operations in the
direction of stronger government involvement may induce confusion.
This option is to insert a step before option a. (Establishing an
Organization for Nuclear Back-end Operations) and initially operate
under a Joint Committee for Public-Private Coordination of Nuclear
Back-end Operations. (It should be noted, however, that this option
may lack in transparency regarding the attribution of responsibility.)
Back-end operations should be assumed by an entity that will still
exist in the distant future (at least one hundred years later), and therefore,should operations be initiated in the form of option b., they should
appropriately be shifted to option a. in the middle term. From theperspective of minimizing costs and implementing operations effectively,
the Organization should make the decisions regarding operational strategy
but basically outsource actual operations to the private sector, withreference to the U.K. Nuclear Decommission Agency (NDA)’ s scheme.
1) Reprocessing and interim storage operations
The Organization for Nuclear Back-end Operations would absorb
JNFL,

co-financed

by

nine

electric

power

companies,

and

the

Recyclable-Fuel Storage Company (RFS), a subsidiary of TEPCO and JAPC,
or it would purchase a share to establish a new JNFL, and assume a part of
the nine companies’ debt guarantee (total of 1 trillion yen). It would alsochange the current system regarding reprocessing costs, so that electric
power companies would have to pay a fee upon generation of power, andthe new JNFL would bear responsibility for receiving and reprocessing
spent fuel. For the immediate future, former JNFL and RPS employees
would assume actual operations and the current JNFL will be responsible
for meeting the new safety standards to be issued in December 2013 for32

government approval and licensing.
The reborn JNFL (or the Organization for Nuclear Back-end
Operations) would be expected to take the initiative in siting interim
storage facilities. In the event this scheme is adopted, provisions regarding
the interim storage of spent fuel within nuclear power plants in the
Nuclear Reactor Regulation Law (including whether management andoperations

will

be

assumed byelectric

power companies or theOrganization for Nuclear Back-end Operations) and in safety agreementswith host local governments will require revision.
2) Decommissioning of Fukushima Daiichi Nuclear Power Plant and othernuclear plants
Given the ultra-long-term required for the decommissioning of the
Fukushima Daiichi Nuclear Power Plant and the circumstances that thecurrent business model may not be maintained in the future, concerns
have been raised whether it TEPCO, a private company, should shoulder
the entire process. Other commercial reactors and reactors installed bygovernment institutions (Japan Atomic Energy Agency (JAEA) and PNC)
will eventually be faced with the issue of decommissioning, and hence, thesame question.
It will be important for the government-led Organization for Nuclear
Back-end Operations to assume the disposal of “negative heritage.” From
this perspective, the appropriate and required balance of shares would be
for the government to have two-thirds, and the private sector, one-third,
thereby leaving the private sector responsible for back-end operations to acertain degree.
A scheme that will withstand long-term decommissioning operations
must be established in advance by injecting public funds from Special
Account for Energy Policy (a portion of which was formerly the Special
Account for Measures to Promote the Development of Electric Power
Sources). Although the immediate agenda would be to inject public funds
into the development of accident–related decommissioning technologies, inthe future, institutional measures should be deliberated to recover a
portion of the total public funds incurred in the entire decommissioning
process, which could be done by separating the accident-related assets tobedecommissioned(andinvolving
33

additional

intensive

operations

exceeding the scale of normal decommissioning operations) from theelectric power company which had the accident and transferring them to
the Organization for Nuclear Back-end Operations, which could, in the
future, sell the decontaminated land upon completion of decommissioning
operations

or

draw

on

relevant

technologies

tolaunchanewrevenue-generating business.
3) Integrating and abolishing other back-end operators
It would be natural for the Organization for Nuclear Back-end
Operations to merge with NUMO, which has been established under asimilar financing scheme.
The future of the Japan Atomic Energy Agency (JAEA) should bedeliberated after ongoing discussions of its reform are concluded.
Back-end operations are inextricable linked with the plutonium cycle andtherefore discussion is required regarding the role the Organization of
Nuclear Back-end Operations will play, including the treatment of ElectricPower Development Co. Ltd (J-Power)’s Oma Nuclear Power Station.
Furthermore, if the JAEA’s functions are transferred to theOrganization for Nuclear Back-end Operations, it will have broad researchand development functions for studies related to the nuclear fuel cycle aswell as the safety of light-water reactors. This means that private sector
cooperation will include not only that of electric power companies, thenuclear operators, but also assistance from domestic and overseas heavy
electric machinery manufacturers in terms of human resources andtechnology.

Consideration

of

the

proactive

participation

of

these

manufacturers in institutional operations will also be required.
The coordination of operations between the government Back-end
PolicyHeadquarters

and

the

Organization

for

NuclearBack-end

Operations will enable the consistent implementation of the nuclear fuelcycle policy in a realistic manner. However, the high-breeder reactor
development plan, which is the largest factor for delays in the nuclear fuelcycle policy roadmap, must be addressed with concrete policy measures.
Therefore, the post-Monju policy roadmap, the need for which has beenreferred to above in Chapter 2, Section (1) (iii)) must at least include thefollowing elements:a) Operational entity and period of the Monju
34b) Information and data to be derived from Monju operations (thisshould be clarified in line with item a). for the purpose of setting out
a common policy concerning the term for Monju operations)c) Reorganization of research themes under the fast reactor cycle
technology development (FaCT) projectd) Strategy for international joint development of fast-breeder
technologye) Further development of a plan for plutonium use and its
management structure based on an understanding of international
trends (iii) Risk of accident
If nuclear power operations are to be sustained in the future, thescale of damage compensation risks which emerge in the event of an
accident will become a major issue. If the drawbacks of the current nuclear
damage compensation program which were brought to light in the
Fukushima accident are left neglected, the new framework for theoperational context of nuclear power will be incomplete. The current
Nuclear Compensation Act embraces various issues which are organicallyintertwined, and therefore require comprehensive review. This report will
focus on the following three issues for which solutions should be discussed
in light of sustaining nuclear power operations. 191) Limiting operator liabilities and establishing a new policy measure
for risk coverage2) Diversifying government response
3) Establishing a compensation management system
A common theme for all issues is risk allocation between the public
and private sectors. We propose the establishment of a new three-layered
policy architecture for nuclear damage recovery (Figure 4). For the purposeof comparison, the structure of the current Nuclear Compensation Act is
exhibited in Figure 3. It should be noted that the system reforms proposed
in Figure 4 seek to implement comprehensive victim indemnification and

19 For broader considerations, refer to: Toward the Establishment of a New Compensation

System for Nuclear Damages: a report by the 21st Century Public Policy Institute Nuclear
Policy Issues Committee , 21st Century Public Policy Institute, 201335

distribution of disaster-related costs and are not confined to amendments
the current Nuclear Compensation Act. The Fukushima accident revealed
that large-scale nuclear accidents could destroy local communities. The
financial compensations provided for in the current Nuclear Compensation
Act are not sufficient for restoring local communities and therefore fail torehabilitate livelihoods in a way victims truly desire. The purpose of our
proposal is to encourage the formulation of comprehensive measures forrecovery from nuclear damages which will enable the indemnification of
victims and the restoring of local communities more promptly andeffectively than the current system in order to “protect persons sufferingfrom nuclear damage” and “contribute to the sound development of thenuclear power business” as stipulated in Section1 of the Nuclear
Compensation Act, and toalso provide nuclear operators higher

predictability of risks.
The current situation of disaster-affected areas fails to provide an
idea of the extent to which damage compensation and decontamination
costs will increase. This fact, accompanied by the unsettled issue
concerning the distribution of costs among nuclear operators, electric
power consumers and the national government has complicated resolution.
A nuclear damage recovery scheme should be designed to allow concerned
parties to estimate total nuclear damage recovery costs and share an ideaof the scale of total financial damages, taking into consideration the
resources held by the operator, electric power consumers and the national
government. Therefore, we propose an amendment to Section 16,
paragraph 2 of the Nuclear Compensation Act (and under the Act on theCompensation of Nuclear Disaster and Local Reconstruction in Figure 4)
so that it will stipulate the need for determining total costs and relevant
procedures (for example, the government could estimate the costs andsubmit the estimates to the Diet) for decisions following deliberation. It is
important that an overall understanding of the damages is shared among
concerned parties promptly after an accident occurs, and total costs
should be determined in a top-down style of decision-making instead of ina bottom-up process.

36

*RYHUQPHQWDLG
DVUHTXLUHG

Compensation amounts

Liability of operators (limited)/LDELOLW\LQVXUDQFHIRU
QXFOHDUGDPDJH/LDELOLW\IRUDOOQXFOHDUGDPDJHVH[FHSWZKHQVXEMHFWWRH[FOXVLRQRIOLDELOLW\*RYHUQPHQWPHDVXUHV1XFOHDUGDPDJHLQGHPQLILFDWLRQFRQWUDFWFRPSHQVDWLRQFODLPVH[WHQG
WR\HDUVQRUPDORSHUDWLRQVHDUWKTXDNHVYROFDQLFHUXSWLRQVWVXQDPLV

 ,QVXUUHFWLRQ JUDYHQDWXUDOGLVDVWHURIDQ
H[FHSWLRQDOFKDUDFWHU

Scope of liability of operators
Source: Ministry of Education, Culture, Sports, Science and Technology

Figure 3

Current nuclear compensation system[Operator liability and compensation amounts]$FWRQWKH&RPSHQVDWLRQRI1XFOHDU'LVDVWHUDQG/RFDO
5HFRQVWUXFWLRQ‫؞‬5HOLHIIXQGV‫؟‬XSSHUOLPLWVRIJRYHUQPHQWFRPSHQVDWLRQWREHGHWHUPLQHGLQ'LHW‫؞‬,QYRFDWLRQGHWHUPLQHGE\YROXPHRIDFFLGHQWUHODWHGUDGLRDFWLYHPDWHULDODQGJHRJUDSKLFDO
H[WHQWRIUDGLRDFWLYHFRQWDPLQDWLRQ‫؞‬3XEOLFVSHQGLQJRQGHFRQWDPLQDWLRQ‫؞‬8SSHUOLPLWRIWULOOLRQ\HQ‫&؞‬RPSHQVDWLRQFRVWWREHDOORFDWHGDPRQJRSHUDWRUVDQG
FROOHFWHGDIWHUDFFLGHQW/LDELOLW\LQVXUDQFHIRUQXFOHDUGDPDJH SULYDWHVHFWRU‫؞‬LQFDVHRIJHQHUDODFFLGHQW‫؞‬DPRXQWRIFRPSHQVDWLRQELOOLRQ\HQ

1XFOHDUGDPDJHLQGHPQLILFDWLRQFRQWUDFW JRYHUQPHQW‫؞‬LQFDVHRIHDUWKTXDNHVWVXQDPLHWFGXULQJQRUPDORSHUDWLRQ‫؞‬DPRXQWRIFRPSHQVDWLRQELOOLRQ\HQ

3ROLF\PHDVXUHVIRUFRPPXQLW\UHFRQVWUXFWLRQ$JUHHPHQWRQPXWXDODVVLVWDQFHDPRQJQXFOHDURSHUDWRUVLQFDVHRIDFFLGHQWV

1XFOHDURSHUDWRUV9LFWLPV

Source: compiled by author

Figure 4

Proposal for new policy architecture
for nuclear damage recovery
371) Limiting operator liabilities and establishing a new policy measure
for risk coveragea) Operator liabilities under the current Nuclear Compensation Act
The Nuclear Compensation Act imposes strict and unlimited liability
upon nuclear operators but exempts operators from liability “in the casewhere the damage is caused by a grave natural disaster of an exceptional
character or by an insurrection” in an exceptional clause in Section 3,
paragraph 1. The Fukushima accident aroused debate over whether thegreat tsunami that occurred in the Great East Japan Earthquake could bereferred to as a “grave natural disaster of an exceptional character.”TEPCO had originally considered the application on this clause but
refrained from pursuing judicial ruling due to strong opposition from thegovernment, public opinion, and developments made in determining theframework of government support pursuant to Section 16 of the Nuclear
Compensation Act (which finally led to the formulation of scheme under
the Nuclear Damage Compensation Facilitation Corporation Act).
There has been strong criticism for substantial government maneuverin determining how to address the indemnification issues in the aftermathof the Fukushima accident. 20 “If strict and unlimited liability is to be
imposed upon a private corporation […] we have little choice but to admit acertain extent of exemption from liability in order to provide corporate
management with predictability. 21 ” Sakae Wagatsuma, then professor
emeritus in civil law at the University of Tokyo, made this statement when
he was called as a witness to a Promotion of Science and Technology &Innovation

SpecialCommittee

meetingdeliberating

theNuclearCompensation Bill 22, but he also gave a strict reading of “force majeure,” asprovided below:“Regarding strict liability, whereas companies were conventionally
not liable in the absence of negligence, they have gradually come to beliable with or without negligence, but being liable without negligence
Akio Morishima, Genshiryoku jiko no higaisha kyusai (1)-(3) – songaibaisho to hosho(Victim relief in nuclear accidents (1)- (3): indemnification and compensation for damages),
Toki no Hourei, Vol. 1882, 1884, 1888
20

21 Akio Morishima, Genshiryoku jiko no higaisha kyusai (1)-(3) – songaibaisho to hosho(Victim relief in nuclear accidents (1): indemnification and compensation for damages), Toki no
Hourei, Vol. 1882, p47
22 Proceedings of the 38th meeting of the Promotion of Science and Technology & Innovation

Special Committee, Vol.14, p4-5

38

naturally has its own limit, which can be approached from twodimensions: quality and quantity. In terms of quality, [a company] canhardly be liable for a grave natural disaster of an exceptional character
that cannot possibly be predicted or an insurrection. This is because, as I
stated before, if you are mining copper, you should include in yourexpenses, costs

incurred by

reduced

rice

yield

as

an

inevitableconsequence no matter what kind of equipment is used. However,exceptional and grave cannot be calculated. Therefore, if you areconsidering strict liability for private corporations, exceptional clausessuch as this should be taken out. Otherwise, someone will naturally cometo say that even without negligence, this [damage] is too much and that
qualitative limits should be placed.”“There seems to be much debate over force majeure as well, this isbeyond force majeure. This is unlikely to occur, and if it is unlikely tooccur, then we wouldn’t need to write anything about it, but as I havereiterated, strict liability has developed mainly in the context of liabilities
of private corporations, and therefore, my reading is that someone will
come out and say that even if they are subject to strict liability, it wouldn’t
make sense to make them liable for something beyond humans
prediction.”
Sakae Wagatsuma also refers to quantitative limits after hisstatement about qualitative limits. His statement is about limited liability,
which is connected with one of the most important issues discussed in thisreport. Therefore, a quotation is provided below23:“Now, in terms of quantitative limits, this will also be calculated, so
the line should be set at around 5 billion [yen] and anything above thatthey should not be liable for – this is the approach in so far as private
corporations are the focus. This bill is also centered on the liability ofprivate corporations which will be supported by the government, andtherefore the strict liability theory which has developed in the context ofprivate corporations is embedded in this bill. In so far as private
corporations are liable, the private corporation bears strict liability.
[…]The portions covered by insurance and the indemnity agreement will be

23 Sakae Wagatsuma, Takeo Suzuki, Ichiro Kato, Ryo Inoue, Katsuji Fukuda, Seisho Horii,

Shozo Nagasaki, Keiichiro Sugimura, Zadankai: genshiryoku saigai hosho wo megutte(Round-table: compensation for nuclear damages), Jurist No.236, October 15, 1961

39

paid by insurance companies and the government as a legal obligation, butwhen the costs exceed 5 billion [yen], the Diet decides on the payments,
which are not mandatory. Furthermore, no one is held accountable for the
exceptional and grave part either. Therefore, from a purely formallyperspective, there is a large difference there. In that respect, if the stancetaken was changed and the law was to read that the national government
was liable under any circumstances whatsoever and for whatever large
amounts of money, thereby holding the national government accountable
at the very beginning, saying later, provided that [the nuclear operator] isinsured, that the insurance imbursement is to be submitted, and thatcompensation must be provided for so-and-so causes. Said this way, it istheoretically the complete opposite, and very strong. This is what I said. In
this sense, I am personally unhappy [with the bill] but trusting thegovernment and the Diet’s wisdom, the conclusion will not be so different.
This is what I have been saying.”
Wagatsuma’s

account would seem tobeslightlydifficulttocomprehend as it was given in the following context. On December 12,
1959, the Special Subcommittee on Indemnification against Atomic Energy
Risks which was chaired by the late Sakae Wagatsuma had reported that
“in

the

event

of

damageswhichcannotbecoveredbydamagecompensation measures, government compensation should be applied” tothe effect that if nuclear power operations constitute a part of national
policy, it should have no flaws in terms of victim protection.
The fundamental policy principle is succinctly presented in the
preface: “Appropriate measures must be taken in order to incur heavy
liabilities on nuclear power operators so that victims will be adequately
indemnified and therefore will not have to suffer in silence, and at thesame time so that the liability of nuclear power operators does not impose
excessive burden from a business perspective, precluding the sounddevelopment of nuclear power.” The strong will of the parties concerned
who had endeavored to establish a compensation system for damages
resulting from nuclear power, a technology of the unknown, can beperceived from the report in its entirety.
However, when the bill was discussed in the government, a strong
majority was against government compensation and argued that even if
nuclear power operations were to be promoted as national policy, as long40

as private entities were the operators, it would be unreasonable for thegovernment to bear direct liability for damages which occur as a result ofsuch operations. Consequently, Section 16, paragraph 1 stipulates nomore than that “the Government shall give a nuclear operator such aid as
is required for him to compensate the damage”. Because the logic that the
government could not directly compensate a victim for damages which
occurred as a result of operations by a private-sector operator had
prevailed, the law explicitly provided for a structure in which thegovernment would only provide indirect support in the form of financial aid
to operators who are primarily liable for damages, instead of being
responsible for direct compensation to victims. Given this legal structure,
the original purpose of establishing the law which had been “to protect
persons suffering from nuclear damage” was replaced with the “sounddevelopment of the nuclear power business” and was even about to beomitted, before it was finally redeemed by concerned parties. After
adoption of the law, Sakae Wagatsuma criticized it, saying that the
adopted law and the report stood on completely different concepts. “Thepeaceful use of nuclear power is an unprecedented operation in history. Its
benefits may be large, but at the same time, it entails risks of grave
damage in case of an accident. Therefore, if the government acknowledges
the need to advance its benefits and decides to implement it, it should
presuppose that not a single victim will suffer in silence.” That having beensaid, he stated that the government “disguised in the name of operator
support and protection, will only indecisively provide “aid” (Section 16). In
practice, victims will be protected by the wisdom of the government andthe Diet.” 24 The late Akio Takeuchi, then associate professor and later
professor emeritus at the University of Tokyo,

pointed out that it would

be an ideal framework if, as stipulated in the law, unlimited aid as isrequired to compensate for the damages is promised, but if the reason thatthe legislation’s deviation from the concept of the report was a reflection of
judgment within the government that the government lacked the financial
capacity to accept it, it would imply “regression” in terms of government
involvement and would therefore put operators in anxiety. Furthermore,
he stated that “when the Promotion of Science and Technology and
24 Sakae Wagatsuma, Genshiryoku nihou no kousou to mondaiten (The framework and flawsof the two nuclear power-related laws), Jurist No.236

41

Innovation Special Committee of the Lower House adopts a peculiar
resolution accompanying the enactment of the law that reads, ‘in order toensure that victims will be protected without regret, the government
should provide adequate aid, and simultaneously, in accordance with the
purpose of protecting victims, provide guidance […] to operators […] on
reserving earnings”, it is doubtful whether the government and Diet have
any intention to provide support without fail.” 25
It is evident from the background to the adoption of the Nuclear
Compensation Act that the circumstances in which the nuclear operator
would be liable and the scope of their liability had been an issue of debatefrom the time of its legislation because it had been strongly acknowledgedthat private companies could not make investments if the scope of risks
was not limited. However, without adequate indemnification to the victimsof an accident, the siting of nuclear facilities could be hindered, therefore
stalling the advancement of nuclear operations. Hence, consensus had
prevailed among academics who deliberated the Nuclear Compensation
Act that if nuclear operations were going to be promoted at all as national
policy with a significance distinct from other policy areas, then thegovernment would have to decide to provide full support in regard ofcompensating victims.
Given the history of this legislation, if the exemption clause is to beretained, the requirements for events which apply should be explicitly
identified. Experience from the Fukushima accident has revealed thatprovisions which present ambiguity concerning the application of laws
related to nuclear damages can undermine the efforts of government andoperators in the face of confusion caused by a combination of grave
natural disaster and nuclear disaster. Therefore, a possible decision would
be to remove it.
Even in the event the exceptional clause is applied, victimized citizens
shall not be abandoned, and therefore, the government will invariably
inject tax money for the indemnification of victims. Under mutual
assistance scheme among operators which is proposed below, the issue
amounts to which monies -taxes or electricity tariffs collected fromnationwide - should be used to recover indemnification costs. A framework
25 Akio Takeuchi, Genshiryoku songai nihou no gaiyou (Outline of Two Laws Concerning

Nuclear Damage), Jurist No236

42

under which the government and nuclear operators come into conflict over
the application of an exemption clause (that is, the retention of the current
exceptional clause) should be avoided. In the event of war, all resources
will obviously converge into government relief regardless of the occurrenceof grave nuclear damages (as grave war-induced damages will occur apartfrom nuclear damages), and therefore insurrections could be retained in
an exemption clause.
b) Emerging financial risks revealed in the Fukushima accident and anuclear operator mutual assistance scheme
Before the Fukushima accident, financial institutions (including
bondholders and credit-rating companies) basically viewed the risks
related to nuclear power operations to be implicitly guaranteed by thegovernment, given the high operational capacity of nuclear power
operators, financial risk reduction measures (tariff regulations based on
FDC pricing) under the Electric Business Act and the role of nuclear power
operators as implementers of nuclear power policy, an important national
policy. However, despite the establishment of the Nuclear Damage
Compensation

Facilitation

Corporation

Act(Corporation

Act),

the

Fukushima accident changed that former impression of nuclear power tooperations

thatentail

grave

risks

of

jeopardizing

thebusinessmanagement and even the existence of an operator once an accident
occurs.).
The ratings of TEPCO’s corporate bonds were lowered, affecting otherelectric powers companies, which could not issue corporate bonds in themonths following the accident. However, once the Corporation Act gainedwide acknowledgement that it was a part of the support measures provided
for in Section 16 of the Nuclear Compensation Act, corporate bonds could
be issued again and the issue has been resolved for the present. However,as aforementioned, with electric power system reforms advancing while therestarting of nuclear power plants remains stalled, electric powercompanies are bound to be exposed to financial risks again. Risks ofaccidents should be reviewed as corporate ratings will impact theconditions for bond issue as well as the amounts procured and loan terms.
In setting the contextual background for future nuclear power operations,the national government’s acknowledgement of nuclear power as a43

particularly important technology in terms of national interest and its
commitment to promote nuclear power should be reconfirmed both
politically and administratively. That having been accomplished, theallocation of compensation/indemnification risks between public andprivate sectors under the Nuclear Compensation Act should be reformed
based on the consensus which had existed among academics at the time oflegislation.
However, given the public distrust prevailing in terms of thetechnological and institutional competence of nuclear operators in general
since

the

Fukushimaaccident, compliancewithsafetystandards

determined by the NRA is certainly insufficient. A new scheme where
nuclear operators are penalized for negligence to strive to improve nuclear
safety levels (by imposing economic burden or weighted inspection items)
or rewarded for high performance in safety operations is called for. Some
ideas are provided below:

i. A program similar to the US Reactor Oversight Process (ROP)26,
under which the Nuclear Regulatory Commission (NRC) links
performance indicators of each reactor with a weighted range ofadditional inspections and makes the findings available forpublic access. Reactors with high performance are to be grantedof longer intervals between regular inspections.

ii. Indemnity fees (rates) under government-sponsored indemnity
agreements for compensation of nuclear damage that is linked
with abovementioned performance indicatorsiii. Insurance premiums (rates) of a new private insurance-based
nuclear energy liability insurance are reported by nuclear
operators to the NRA. Figures are made available for publicaccess.

iv. Effective peer review assessments are conducted among nuclear
operators
In order to embed these ideas into a larger mechanism, we propose
the establishment of an “ex-post-levy-collection-based mutual assistanceprogram.” By introducing this scheme, nuclear power operators will “share
a common destiny” in terms of safety operations, meaning that once
26 Information on ROP can be found at: www.nrc.gov/NRR/OVERSIGHT/ASSESS

44

another operator causes an accident and becomes liable for damages, anoperator will immediately suffer significant impacts on its corporate
finances. Since the Fukushima Daiichi Nuclear Power Plant accident, theJapan Nuclear Safety Institute (JANSI) has involved operators in a peer
review

processonsafetyatnuclearpower

plants.

An“ex-post-levy-collection-based mutual assistance program” will help
enhance the effectiveness of such processes. The U.S. Price-Anderson
Nuclear Industries Indemnity Act (Price-Anderson Act) also contains a“mutual insurance” arrangement that functions similarly.27 It could also
effectively dismiss concerns that limiting liability may generate a moral
hazard.
Given the scale of compensation payments made by TEPCO, theupper limit of damage compensation payments could be set at 2 - 4 trillion
yen. The scheme would require nuclear operators to pay retrospective
insurance premiums in the event another operator causes a nuclear
accident. The current scheme under the Corporation Act where operators
must pay a general contribution to the Corporation would be abolishedwith the introduction of the new “mutual assistance program.”
The payment of general contributions that nuclear operators are
currently obligated to pay is stipulated in Article 38 and the amounts paid
are determined in Article 39. However, the only purpose provided for thesecontribution in Article 38 is “to be allocated for the expenses necessary forthe business of the Corporation,” which could be understood to imply thatthe scheme is merely a lockstep approach to soliciting contributions fromall the banks which was resented by the public when it was taken morethan a decade ago by the Ministry of Finance in relation to saving someproblematic banks with excessive non-performing loans. It has been
explained that it is reasonable to ask operators to make payments fromordinary times as the Nuclear Damage Liability Facilitation Fund is
obligated to provide financial aid to nuclear operators in case of an
accident. The Fund has also asserted that it is collecting the hidden costsof nuclear power, but these “nuclear power generation costs” have alreadybeen disclosed by the series of laws which determine the costs incurred fornuclear back-end operations. Furthermore, the scheme lacks concrete
27 German nuclear damage compensation law sets out a similar mutual assistance scheme fornuclear operators45

standards

tocalculatecontribution

amounts

which

are

currently

determined abstractly. Hence, the scheme could risk arbitrary use,28 and
if its purpose is truly to be prepared for future accidents, then it could be
replaced with a mutual assistance scheme among operators and generalcontributions would no longer be required.29
Once an accident occurs, the operation rates of all nuclear facilities
will be inevitably affected. In order to minimize electricity tariff raises, anupper limit should be set, as is the case in the U.S., on the retrospective
insurance premium due (with the Nuclear Damage Liability Facilitation
Fund(Facilitation

Fund)covering

forshortfall

amountsthrough

contribution government bonds). Furthermore, following the U.S. model,
after the first year when compensations are urgently needed, the court or athird party would be responsible for prioritizing payouts and forformulating an allocation plan based on which compensations would be
paid in order to facilitate the process30. This would enable compensation
for late onset injuries This will also provide clarification for important
issues regarding compensation in tort law such as adequate causation andscope of damage, and hence, a breakthrough for the conventional practicewhere compensation policies set out by the Dispute Reconciliation
Committee for Nuclear Damage Compensation which only has theauthority to mediate reconciliation have formed precedents and have led to“creative” legal interpretations. Furthermore, the court or third party
managing the fund could be given the authority to judge whether damages
can be attributed to government instructions or standards.
(Reference: U.S. Price-Anderson Nuclear Industries Indemnity Act(Price-Anderson Act))
The proposed mutual assistance scheme among nuclear operators is
28 Yasufumi Takahashi, Kaisetsu Genshiryoku songai baisho shien kiko hou- genshiryoku
songaibaisho seido to seifu no shien no wakugumi (The Nuclear Damage Compensation
Facilitation Corporation Act explained: the nuclear compensation system and the frameworkof government assistance) , Shoji Houmu, p127, p173-177
29 Issues related to general contributions can be found in: Toward the Establishment of a New
Compensation System for Nuclear Damages: a report by the 21st Century Public Policy
Institute Nuclear Policy Issues Committee , 21st Century Public Policy Institute, 2013

The Gulf Coast Fund, a trust fund for disaster relief established after the deepwater
drilling accident in an oil field in the Gulf of Mexico caused by BP can also be referred to.
Discussion on the accident and damage indemnification can be found in: Toward the30

Establishment of a New Compensation System for Nuclear Damages: a report by the 21stCentury Public Policy Institute Nuclear Policy Issues Committee , 21st Century Public Policy

Institute, 2013, Part III, Chapter 246

based on the mutual assistance scheme, or the Second Tier, under the U.S.
Price-Anderson Nuclear Industries Indemnity Act (Price-Anderson Act).
The Price-Anderson Act was enacted in 1957 as part of amendments madeto the 1954 Atomic Energy Act in order to address the reluctance among
electric power companies to bear the risk of accidents and technology
development costs related to nuclear power, despite government calls fordomestic electric power companies to engage in nuclear power generation
under then President Eisenhower’s policy for the peaceful use of nuclear
power.
The main objectives of the Act are:i.

to eliminate the concerns of private operators reluctant to enter the
nuclear power industry for fear of potential liability beyond its
own resources in the event of a devastating nuclear power plant
accidentii.

tosecureacompensation

schemetoensureadequate

compensation to the victims of a devastating nuclear power plant
accident
Upon adoption, the Act placed a ceiling of 560 million dollars on the
public liability of a nuclear operator per one nuclear accident, requiring
companies to obtain 60 million dollars in private nuclear energy liability
insurance and provided for further government commitment of up to 500
million dollars to cover any claims in excess of the private insurance.
Having been amended several times, the recent revision was enacted in2005 when it was determined that the structure for damage compensation
to be maintained by nuclear power operators would comprise Tier 1, or“the maximum amount of liability insurance available at a reasonable costand on reasonable terms from private sources” (375 million dollars), andTier 2 (introduced in the 1975 amendment), or an ex-post-levy-collectionbased

mutualassistanceprogram(secondary

financialprotection)(premium of 111.9 dollars per unit, payable at a rate not to exceed 17.5
million dollars per year, which multiplied by the number of currently
licensed reactors amounts to total compensation funds of an equivalent ofover 1 trillion Japanese yen).
The constitutionality of the Price-Anderson Act was challenged31 on
two grounds – first, that “limited liability” was a form of legal abuse
31

Duke Power Co. v. Carolina Environmental Study Group (1978)47

because the Act did not ensure adequate compensation for victims ofaccidents, and second, that it was a violation of equity before the law
because it treated nuclear accidents differently from other accidents.
However, the Supreme Court ruled that it did not violate the Constitution.
An outline of the ruling is provided below as similar debate could be
expected in Japan if “limited liability” is to be adopted.
i.

The imposition of a statutory limit on liability will encourage
private industry participation and hence bears a rational relationshipto Congress' concern for stimulating private industry's involvement in
the production of nuclear electric energy. Therefore, it is notunreasonable to treat nuclear accidents differently from otheraccidents.

ii.

Even in the event the compensation fund of 560 million dollars
cannot guarantee full indemnification of damages in all potential
circumstances, this will not constitute grounds that limited liability is
unreasonable or that it is a due-process violation.

iii.

In view of the extremely remote risk of a major nuclear accident inwhich damages will exceed the statutory limit on liability andCongress’ intention to implement all necessary and appropriate
measures to for the indemnification of victims in the event of such an
accident, Congress’ decision to impose a statutory limit of 560 million
dollars lies within its discretion and does not constitute a violation ofdue process.

iv.

The ruling of a lower court that a limited liability scheme would
generate moral hazard is irrelevant as such a scheme would not affectthe screening process for licensing nuclear facilities and electric
power companies themselves will be the largest victims in an accident.

After several amendments, the Price-Anderson Act currently does not
explicitly stipulate operators’ “limited liability” but is more focused on
defining a “payment limits scheme”. When damages exceed the maximum
fund value, the President and Congress will formulate a compensation
plan as provided for in the Act. The compensation plan will involve
retrospective contributions from various sectors including industry. Itshould be noted that the Act does not dismiss the possibility of additional
payments being required of nuclear power operators in the compensation
plan.
48

The proposed mutual assistance scheme accompanied by upper
limits to compensation payments liable could be established within two
legal frameworks: firstly, amending the current Nuclear Compensation Act
under which nuclear operators are subject to unlimited liability so thatthey would have limited liability; and secondly, retaining the unlimited
liability of nuclear operators and instead placing a cap on the payments
made by operators to the compensation and covering for shortfalls bygovernment compensation. Both schemes would be founded on thefollowing grounds:32
i.

The equitability of imposing unlimited liability and limits on theapplication of exemptionsii.

Private companies should not be liable for compensation amounts
that would impede the continuity and development of industrial
facilitiesiii.

If a technology has reached a degree of maturity that its benefits
can be enjoyed by the general public, the general public shouldbear a certain amount of risk within the limits of acknowledged
benefits

iv.

Limits on compensation amounts to be paid in the event of an
accident are a prerequisite for government guarantees (in order toenable the limitation, and thus estimation of the risks involved)
Given the current circumstances that the Fukushima accident has

called for reconsideration of operator liability, the latter scheme may be
the more natural step. The Swiss nuclear damage indemnification law (Acton Nuclear third Party Liability), Section 29, provides an important modelfor the joint cooperation of the national government and nuclear operatorsin addressing cost-related issues in major nuclear disasters (government
compensation includes the contributions pooled by nuclear operators)
under a scheme where operators bear unlimited liability.33
32 Refer to: 21st Century Public Policy Institute (2013) Toward the Establishment of a New

Compensation System for Nuclear Damages: a report by the 21st Century Public Policy
Institute Nuclear Policy Issues Committee , Part II, Chapter 3 and Soji Yamamoto,Kokusaihou ni okeru kikensekininshugi (Absolute liability principle in international law), p16,

p224

33 Refer to : 21st Century Public Policy Institute, (2013) Toward the Establishment of a New

Compensation System for Nuclear Damages: a report by the 21st Century Public Policy
Institute Nuclear Policy Issues Committee , Part II, Chapter 3

49

(Reference: Swiss Act on Nuclear Third Party Liability, Section 29)34
Section 29 (Principles for major occurrences)
1. If there are grounds for anticipating that the financial resources of theperson liable, the private insurer and the Confederation, available forcovering the damage, will not be sufficient to satisfy all claims (major
occurrence), the Federal Assembly shall establish an indemnity scheme bymeans of a Federal Order of general application, not subject to referendum.
This Order may cancel the right of recourse against the person liable of all
public and private insurers and sickness insurance funds, subject to theprovisions of Section 20. If necessary, the Confederation may pay
additional contributions in respect of damage not otherwise covered.
2, The Order shall determine the general principles for compensation of
the injured parties in order to ensure the equitable distribution of allavailable funds. In so doing it may derogate from the provisions of this Act.
3. The Federal Assembly may entrust a special independent body with theimplementation of the indemnity scheme. Appeals to the Federal Court
against decision of this body shall be permissible.
4. The Federal Council shall take any provisional measures that may benecessary.
Figure 5 compares the nuclear compensation schemes of Japan, theU.S., and Switzerland, including the U.S. Price-Anderson Act referred toabove.
c) Establishing procedures for business reorganization
Shifting to a limited liability scheme and establishing a mutual
assistance scheme for nuclear operators should significantly lower the
possibility of operators being hammered by excessive debts derived solely
from compensation for damages in a major accident. However, as seen in
the aftermath of the Fukushima accident, the burdens of decommissioninga reactor damaged in an accident are substantial; and therefore, in the
middle- to long-term, the optimal policy option would be to concentratethese

operationsorganization.

inaOtherwise,

singlenewly

establisheddecommissioning

operations

government-led
may

drive

company into insolvency, depending on its scale. Increased thermal fuel34 Japan Atomic Industrial Forum, Inc. website:www.jaif.or.jp/melmag_db/2012/1126genbai.pdf

50

a

U.S.

Japan

Indemnification bydecision of Federal
Assembly

Government measure (aid)Federal government
compensation plan
㧔*1㧕

retrospective insurance
premium$111.9Mil1.05104reactors
㧩$12.22Bil(Limit of $17.5Mil per reactor per
year)

CHF1Bil

CHF0.5Bil

Government compensation
Government(Contributions) ( *3)Liability Insurance Agreement compensation(Indemnification
CHF0.7Bil
fees)

Liability Insurance Agreement
Primary Liability Protection$375Mil

Liability Insurance
Agreement
JPY120Bil

Risks covered byliability insurance

Gov’t
compensation(Contribu
tions)

䋨*4)
JPY120B
Risks notcovered byliability
insuranceWar,
exceptional
naturaldisaster

Risks covered byliability insurance

Terrorism

Public Liability(Liability, precautionary evacuation costs)

Compensation measures㧔JPY120Bil㧕

Compensation measure )($12.59 Bil)[mutual assistance scheme
among operators]

War, workers’ comepensation

SFP(*2)Government measure䋨aid䋩
grave natural disaster of an exceptional character, insurrection

Switzerland

㧔*1㧕Possible increase of compensation measures㧔*2㧕 Secondary Financial Protection
㧔*3㧕Contributions are collected from nuclear operators and compiled in a nuclear damage fund (Nuklearschadenfounds) (CHF290Mil, as of 2001)
㧔*4㧕No funds accumulated as premiums under liability insurance agreement)

Source: compiled by author based on material provided by Noboru Utatsu

Figure 5Comparison of nuclear compensation schemes (Japan, U.S.,

Switzerland)costs may also constitute a threat to corporate finances.
Even under such circumstances, a company may be able to manage
to retain a working cash flow by using the “government aid” provided
under the current Corporation Act, and such an option could perhaps be
maintained in the new framework. However an additional scheme would be
required if a company seeks to remain a going concern. The corporate
reorganization scheme should prepare for cases in which no other electric
power company is willing to merge with the company by establishing atransient “bridge electric power company” financed by the Facilitation
Fund (which would require an amendment to the Corporation Act to add a
new item to its operations) in order to appropriately handle its prime
assets and non-performing assets (by, for example, transferring prime
assets to other electric companies, to the Organization for Nuclear
51

Back-end Operations proposed in the previous section).
In TEPCO’s case, various opinions were presented in support of andin opposition against its legal liquidation, which was finally abandoned on
the grounds provided below.35 The decision was based on the judgmentthat compensation for nuclear damage must be fully made, transactions
related to the stabilization of the nuclear accident could be continued, andcapital investments should be made for a stable electricity supply.
i.

Damages would not be appropriately compensatede.g. Claims for damages could be cut off. Victims’ right to claim
compensation for damages would be subordinated to generalmortgage rights held by bondholdersii.

Compensations

would

be

delayedandinadequate

damagecompensation
e.g. Victims would be imposed with the burden of taking part inlegal liquidation procedures.
iii.

Serious operational problems would arouse in regard to coping
with

the

aftermathoftheaccident

anddecommissioning

operations
e.g. Payments of accident-related costs might not be promptly
approved
Other concerns included increased financing costs for TEPCO in the
coming months.
Furthermore, considering the fact that one of the purposes of the
Nuclear Compensation Act is to prevent compensation for damages from
impeding ”the sound development of the nuclear power business,”
allocating government aid to avoid TEPCO’s insolvency could be referred toas an appropriate decision in light of law.
Under a limited liability scheme, when total compensation costs
exceed the sum of upper limits for operators and funds available from themutual assistance scheme, the compensation of victims would become anational

government

agenda,thereby

invoking

the

“Act

on

the

35 Yasufumi Takahashi, Kaisetsu Genshiryoku songai baisho shien kiko hou- genshiryoku

songaibaisho seido to seifu no shien no wakugumi (The Nuclear Damage Compensation
Facilitation Corporation Act explained: the nuclear compensation system and the frameworkof government assistance) , Shoji Houmu, p60-71

52

Compensation of Nuclear Disaster and Local Reconstruction” (Figure 3)
which will be discussed later herein.
2) Diversifying government response36
The response called for in a nuclear accident is varied according to
the scale of the accident. It would be best if damage costs did not exceed
the limits of the proposed private liability insurance and the mutual
assistance scheme among operators, and the financial impact upon the
nuclear operator was limited. An accident of the Fukushima accident’s
scale is unlikely to occur under the new safety standards, but given the
Fukushima accident, it remains important for us to be prepared for
unexpected incidents.
The features of a nuclear accident which were revealed in the
Fukushima accident in relation to compensation issues are as follows:i.

Damages are widespread geographically, as well as in content and
time.

ii.

Various factors other than the accident complexly and significantly
affect the occurrence and spread of damages (complex disasterinterlinked with natural disaster, harmful rumors, the integrity ofsafety standards, problematic initial evacuation measures taken
by national and local government).

iii.

Some damages (destructed local communities and employment ofvictims) cannot be recovered by monetary compensation.

Some emerging problems can be attributed to the abovementioned factors:i.

With many complications in settling disputes between concerned
parties(TEPCOandvictims)

andtherefore

increasedadministration costs, much of the resources for compensation
have been lost to transaction costs.
ii.

Some

instances

have

been

observed

where

the

DisputeReconciliation Committee for Nuclear Damage Compensation’s
The ideas presented in this subsection were greatly inspired by discussion in the following
reference: Tanabe,,Tomoyuki, M. Maruyama㧔2012㧕Fukushima Daiichi Genshiryoku
Hatsudensho Jiko ga Teikishita waga kuni no genshiryoku songai seido no kadai to sono
kokufuku ni muketa seido kaikaku no houkousei (The issues concerning Japan’s compensation
system for nuclear damages raised by the accident at Fukushima Daiichi Nuclear Power Plant
and the direction of system reforms to overcome the challenges), Central Research Institute ofElectric Power Industry. The proposal made herein differs from the policy option proposed in
Tanabe and Maruyama (2012). criepi.denken.or.jp/jp/kenkikaku/report/detail/Y11024.html
3653

guidelines present an extended interpretation of precedents on
adequate causation. This has been supported by a publictendency to find reasons to criticize the “inadequateness” of victim
compensation.
iii.

Compensation-related operations are sometimes conducted basedon the easiness of a certain compensation payment instead of theactual need for it, and therefore, the compensation for moreurgent damages have been delayed and a sense of injustice has
been enhanced among victims.
It is well understood from the situation that a major nuclear accident

cannot beeffectively resolved infull under the current Nuclear

Compensation Act which is based on tort law, which governs relationships
between individuals. In the event of an accident which victimizes a massive
number of people across a wide geographical area and is likely to befollowed by a prolonged aftermath, the government should not be confined
to providing financial assistance in the form of loans under the
Corporation Act, and under the new framework for nuclear operations
should jointly or complimentarily assume the responsibilities of victim
compensation and restructuring affected areas with the concerned
operator who is primarily liable for such damages.
This can be achieved by embedding both additional disastercompensation (the national government would take over the complaints
extended to operators to let them be addressed by an organization withpooled funds similar to a relief fund) and various measures regarding local
rehabilitation into a single bill. The purpose of the bill would be the promptand effective resolution of accidents and restoration so that it will belegislatively acceptable to fit the two elements in to one bill, which isimportant in order to gain a comprehensive understanding of the damages
and inject required resources where they are most needed for efficient local
rehabilitation and consequently true victim compensation. Having two
different legal platforms for additional disaster compensation and local
rehabilitation will hinder the comprehensive consideration of damages andmay even result in their implementation (governance) by different
government agencies. Different implementation bodies may of course be
assigned even under a single framework, but even then it would be betterto have a legal framework that constantly requires the consideration of54

both aspects together in case of amendments or further legislation.
In the event of complex disaster, a government body to address therestoration of local communities destroyed by a nuclear accident should beestablished under the Reconstruction Agency or its equivalent. If damages
have occurred from common natural phenomena such as a tsunami,
compensation monies required for local rehabilitation should be allocated
not from nuclear damage compensation funds but from the generalaccount budget.
The proposed Act on the Compensation of Nuclear Disaster and Local
Reconstruction should incorporate the following provisions with regard to
the abovementioned issues. Items iv. and v. may be considered withreference to compensation schemes which were employed in dam
construction projects to compensate for livelihoods in sinking local
communities (compensation of costs incurred for the relocation of entire
communities and in-kind compensation). Implications from a thoroughstudy and analysis of past cases should be drawn upon in formulating
effective policy measures.
i.

Firstly, stipulate the procedures to determine whether this law
is applicable, based on: a) the amount of radioactive material
released as a result of the accident; b) geographic coverage; andc)temporal impactii.

Stipulate that in the event this law is applied, damages
exceeding the amounts covered by the nuclear operator liability
insurance

andmutualassistanceschemeshallbecompensated for by the government
iii.

In

the

event

that

this

law

is

applied,indemnities(compensation) within the framework of the nuclear operator
liability insurance and mutual assistance scheme should not
be distinguished from indemnities (compensation) to becovered outside of the framework. By applying this law, thenuclear damage compensation scheme shifts from a scheme
governed by tort law for compensation between individuals to
one bearing a public law character and including compensation
for the livelihoods of individuals and communities. Legalgrounds and precedents as well as overseas legislations are yet55to be studied regarding the shift from tort law to public law. A
scheme is also required to determine which damages should beprioritized in the allocation of funds and what process should
be followed when indemnification or compensation amounts
are likely to exceed the framework.37
iv.

With reference to the issues that aroused in the legislation of
the

Law

Concerning

Pollution-Related

HealthDamageCompensation and other Measures and the effectiveness of its
implementation,compensation

procedures,

includingthescope of damages (e.g. the extent to which economic damages
should be included is yet to be discussed), the framework forthe acknowledgement of damages, and administrative review
procedures (the Dispute Reconciliation Committee for Nuclear
Damage Compensation will govern only administrative reviews)
should be determined.
v.

Provisions

on

local

reconstruction

shouldincludedecontamination. The law will absorb the current Act on
Special Measures concerning the Handling of Pollution byRadioactive Materials in which case the exceptional clause of
Section 3, paragraph 1 of the Nuclear Compensation Act should
be amended so that if the exceptional clause is to be applied,
the government, not nuclear operators, will compensate fordamages (see right-hand side of Figure 3). The law should
stipulate that decontamination targets shall be determinedthorough joint deliberation by the NRA and other technology
organizations. The implementation framework and institution
required to ensure the effective implementation of operations
need to be determined.
vi.

Examples of local reconstruction measures are provided below.
The appropriateness of the provisions of the Act on Special

37 Other issues requiring consideration include: i) determining whether the contact forcompensations and negotiations should be the operator or national government (or local
government) depending on the subject of indemnification / compensation; ii) whether shifting
to a compensation system governed by public law will inhibit the equity of individualcompensations depending on the damages incurred (as, in theory, damage relief will be
provided as a group, instead of to the individual). As these issues need to be resolved in
discussion between operators and the government, the basic framework should be determinedby law to maintain a more transparent and flexible system, the roles of concerned bodies andrelevant procedures of which should be made explicit at the time of enactment.

56

Measure for the Rebirth of Fukushima should be determinedbased on a study of its effects and an analysis of the current
state of affected areas.
-industrial policy measures to attract companies to the region
as well as encourage the establishment of new businesses inorder to secure employment for victims;-an increased ratio of public works subsidies for thereconstruction of local infrastructure;-continued free healthcare checkups; and-measures to address and prevent economic losses and otherdamages incurred by the spread of bad rumors.

57

3. Future processes
In order to advance the abovementioned measures to lay thegroundwork for future nuclear power operations, we must consider theircorrelation with the processes and schedules of the following related policy
agenda.
1) Formulation of the Basic Energy Plan and preceding deliberations in
the Advisory Committee on Natural Resources and Energy (jointdeliberations on global warming countermeasures in the Industrial
Structure Council and the Central Environment Council)
2) Timeline and details of the draft proposal for amendments to theElectricity Business Act (electric power system reforms)
3) Addressing revisions to the Act on Compensation for Nuclear Damage4) Developments in the NRA’s backfit-related screenings for approval andlicensing and subsurface structure surveys conducted in the Shimokita
Peninsula5) Review of TEPCO’s Comprehensive Special Business Plan, including
radiation-tainted water (restarting nuclear power plants, tariff-related
issues, financing…)
6) Developments towards restarting the JAPC Tsuruga Nuclear Power
Plant
7) Completion and operation of JNFL’s reprocessing plant and status of
the Recyclable-Fuel Storage Company (RFS)The policy direction and framework of these agenda should be more
concrete before the end of the year; and therefore the general framework
for a comprehensive solution for nuclear power issues which has been
proposed in this report should be brought to public attention at this time.
Specific policy measures should be drawn up next year in preparation of
makinga submission to theordinary Diet session in 2015

forimplementation through various bills and budgets the following fiscal year.
However, some of the issues discussed in this report may need to beaddressed at an earlier time. Therefore, concerned parties should at least
have internal discussions regarding their approach to these issues. We
hope that this report and its policy proposal can contribute to constructive
discussion on these matters.
58

Toward a Comprehensive Solution for
Nuclear Policy and Business Challenges
㧔Project Leader: Akihiro Sawa㧕
November 2013
The 21st Century Public Policy InstituteKeidanren Kaikan 19th Floor,
1-3-2, Otemachi, Chiyoda, Tokyo 100-0004
TEL㧦+81-3-6741-0901
FAX㧦+81-3-6741-0902
HP㧦http//www.21ppi.org