Tax electricity consumption and raise money for relief

Because of the breakdown of Fukushima Daiichi Nuclear Power Plant caused by the big earthquake and tsunami, electricity supply in the Tokyo metropolitan area is in shortage. The so-called "planned blackouts" have been implemented almost every day in various parts of the area. Because there is no hope for the nuclear power plants to recover, and because it will take time to build alternative sources of electricity, the Tokyo metropolitan area will suffer power shortage for many months in the future. The government is calling for efforts to save electricity, and many companies and institutions, including the one that I work for, have stopped using the heating system and turned off redundant lights.
However, on my way home on the day when the Minister of Economy, Trade, and Industry called for more efforts to save electricity, I saw many stores that ignored the call and kept on lighting their luxurious lights as if nothing had ever happened. Simply calling for the people's consciousness to save electricity is not enough, because there is no way to force the people who lack consciousness to save electricity.
The "planned blackouts" have shown us how deeply our daily lives depend on electricity supply. Several traffic accidents are reported that are believed to be triggered by the blackout of traffic signals. Frequent blackouts will severely damage people's daily lives and productive activities. We need to consider a way to suppress electricity demand, rather than simply turning off the switch.
I think all economists agree that the best way to balance supply and demand when demand exceeds supply is to raise the price. Even those who have no intension to change their lives will be given the incentive to save electricity. At this moment, however, if TEPCO (Tokyo Electricity Power Company) raises prices, it will trigger public anger against the company. But if the government levies a temporary tax on electricity consumption, pursuading the public that the collected tax will be used for the relief of the people living in the area struck by the earthquake and tsunami, I think people will support such proposal.

Comments on Ian Bremmer, The End of the Free Market, Portfolio, 2010

This book puts forward an attractive notion to describe the type of capitalism which is different from western free-market capitalism. That is "state capitalism". China, Russia, Saudi Arabia, and UAE are the countries which the author depicts as the champions of state capitalism. State capitalism is a type of market economy in which private enterprises play important roles but the government is heavily involved in the market to achieve political goals. I learned a lot about the oil-rich countries of middle east from this book. However, I found some misleading parts in this book regarding Japan and China. The author writes that "(MITI) produced most of Japan's prime ministers", but as far as I know none of the postwar prime ministers had served as a bureaucrat at MITI, with the exception of Nobusuke Kishi, who was a bureaucrat at the Ministry of Commerce and Industry (Shokosho), the predecessor of MITI. The author's description on China's virtual monopoly of global rare earths production, saying that "The Chinese government has accomplished this by investing billions in mines and processing at home", is also misleading. According to books and articles on rare earths published in China, it is obvious that China's monopoly has been accomplished not because the government made efforts to do so but because the government has had only loose control on rare earths resources. The government intends to strengthen the control over rare earth mines and restrict production and exports, in order to preserve the resources. But many private miners entered the business of rare earths extraction, increasing the production volume, and driving the price down, forcing rare earth mines outside of China to stop production, and leading to China's monopoly. This is a kind of development that is against the will of the Chinese government.

business as usual?

This morning I came to my office almost at the same time as usual. The commuting trains were operating normally, and, to my surprise, they were less crowded than usual. An European journalist called me last night, saying that he was a little surprised by the calmness of the people in Tokyo. Maybe that's true, except for the fact that stores are running short of food, batteries, and daily necessities and there are long queues of cars in front of gasoline stations waiting for putting fuel in their tanks.
The DVD recorder at my office went out of order, perhaps because of the earthquake, and yesterday I made telephone calls to the retailer and the manufacturer (Panasonic) service station. They were working as effeciently as usual. This morning I contacted a book seller to buy some books and he was at the office working as usual. Business is quite normal here in Tokyo, except for a sense of anxiety to the nuclear power plant accident which is still in progress.

a forced eco-friendly life

After the 1st nuclear power plant of Fukushima exploded the day before yesterday, the 3rd plant blasted just an hour ago. Tokyo relies its electricity supply on these plants in Fukushima, so it is forecast that the power supply in Tokyo in the coming days (or, perhaps, weeks) will be limited considerably.
This morning I went to the railroad station, but I had to give up going anywhere because there was a long queue in front of the entrance waiting to be allowed to enter the station, where the train arrives only occasionally. It is amazing that so many people still think that they need to go to their jobs even under this circumstance. Isn't it a good reason to stay at home and have a rest?
I decided to stay at home and lead a forced ecology-friendly life. I can make a net contribution to the energy shortage because my house is equipped with a solar power plant which, during sunny days, can not only supply enough electricity which my family needs but also provide redundant electricity to the power grid.

a devastating earthquake in northeastern Japan

Yesterday, when I was in my office, the building started to shake slowly, and soon the shake became intense. Thinking that the building might have some trouble I nearly panicked. Some files of brochures fell down from the bookshelf but the building itself seemed to have no trouble, thanks to the enforcement work completed last year. All of the subways and railways were out of operation during the whole afternoon. I ran and walked home. It took me two hours to arrive at my house in Ogikubo. Because the roads were crowded all the way, it seemed that walking was the fastest way to get back home.
Even with the severe shake, most of the houses and buildings I saw on the way home stayed intact, except for some facades of old houses that crumbled. The photo shows the biggest collapse I saw on my way home. It is a stone wall of a graveyard near Shinjuku. Most of the houses and buildings and even the construction sites in Tokyo had been well prepared for earthquakes. Up to the moment of writing, 4 people are reported dead in Tokyo. The casualties in the northeastern part of Japan, however, are reported to be very heavy. The death toll already reached 700, and it will perhaps exceed 1000. Most died because of the dreadful Tsunami.
Electricity and water supply remain normal in Tokyo. Many people have rushed to the stores to hoard food. It is necessary to stay calm at this moment.

How many automobile manufacturers are there in China?

It is a widely known fact that China has more automobile manufacturers than any other country in the world. But the exact number of manufacturers is not a figure that is readily available. The "China Automobile Industry Yearbook" reports that there were 115 automobile manufacturers in 2009, and the figure was almost flat since 1998, when there were 119. But we can name quite a few new entrants that entered the market after 1998, such as Beijing Hyundai, Tianjin Toyota, Guangzhou Toyota..to name but a few. Furthermore, when we count the manufacturers which produced more than one vehicle in 2009 that are reported in the Yearbook, it exceeds 115.
Using the raw data on automobile production gathered by China Automobile Technology Research Center (CATARC), which compiles the Yearbook, I counted the number of manufacturers one by one. To be honest, even this Center, a half-governmental body which has a strong influence on automobile manufacturers in China, does not necessarily collect the data of all the manufacturers that exist in China. The data, however, show that there were 146 manufacturers in 2009, far more than the figure reported in the Yearbook. 146 is a figure that does not include the holding companies of automobile industrial groups. The figure only includes the firms which have legal person status. Those companies which do have independent legal person status but in reality can be regarded as a factory of other companies, such as Toyota Kyushu of Toyota, are also counted in my calculation. Therefore, among the 146 firms, many are not regarded as indendent players, but in any case, the total number of manufacturers increased from 135 in 2001 to 155 in 2007, and thereafter started to decrease slowly.

Growth Projection of the Chinese Automobile Market

On Feb 14, I went to Ohta City of Gunma Prefecture to give a public lecture on the Chinese automobile industry. Why are these people at Ohta interested in Chinese automobile industry? It is because Fuji Heavy Industries Ltd., a Japanese car maker which has its main car plant in Ohta, is now negotiating with Chery Automobile about establishing a joint venture in Dalian, China, to produce Subaru-brand cars there. The suppliers which are supplying parts to Subaru need to consider whether to follow Subaru and produce parts for the Dalian car plant or not.
China has become the biggest automobile market in the world since 2009. In 2010 alone, 18.5 million vehicles were sold. China's rise to the top position was precipitated by the sharp decline of US auto market after the financial crisis, but I think China will continue to be the largest in the world in the future.

How many automobiles will be sold every year? Growth projections of the Chinese automobile market always fail. In 1993, the Chinese State Planning Commission asked experts to estimate the size of the market in 2000. Their answer was 2.5 to 3 million units. But the actual sales volume in 2000 was only 2 million. In 2001, the State Economy and Trade Commission estimated that the sales volume in 2005 would be 3.1 to 3.5 million. But the actual sales volume in 2005 was 5.7 million. The history of failed estimates makes me think that there is no difference between sophisticated models and rude models--both are destined to be wrong anyway.

The following is my rude projection: according to my estimation, during the period of 2001-2009, 4.9 percent of the existing stock of automobiles was replaced by new automobiles. In 2010, 3 million units were bought as replacement of existing automobiles, while 15 million units were bought as new addition to the existing stock. Suppose that the amount of new addition will stay at the level of 2010--15 million. The pink line in the figure shows the amount of sales for newly-added demand. Replacement demand will grow, because the stock of automobiles will continue to grow. The blue line in the figure shows total demand, so the gap between the two lines is the demand for replacement.

According to this conservative projection, the size of the market in 2020 will be 26 million units, and that of 2030 will be 34 million.

The reason I took a rather pessimistic view for the new addition is because from January 2011 Beijing City started restricting the number of new issues of number plates. It is reported that new issues in Beijing will be reduced from 750 thousand in 2010 to only 240 thousand in 2011. This means that automobile sales will be reduced by half a million units by Beijing's restriction. Shanghai has already introduced similar restrictions in 1994. Because traffic jam is becoming a serious problem in many other cities, it is likely that some other cities will follow suit. The demand for automobiles may be severely suppressed by such restrictions in the richest cities in China.

(I will continue writing my views on Chinese automobile industry in my following posts.)