HIKONE, SHIGA PREF. – I have long advocated the path of “green growth” for Japan. During the past two decades, the Japanese economy has suffered from an extremely low annual growth rate averaging 0.9 percent in real terms and minus 0.2 percent nominally.
This near-zero growth trend has continued since Japan plunged into the postbubble recession that began in March 1991. I believe the trend has continued for three major reasons:
• The first is the saturation of the automobile market after the proportion of households owning cars reached 80 percent of the total in 1991.
The growing production and sale of passenger cars — each weighing more than 1 ton — benefited a wide range of industrial segments, from the materials industry to the oil industry and service stations, creating huge employment opportunities.
Expansion of the car market had an extremely big ripple effect on related industries. The steady growth of the auto sector contributed substantially to the relatively strong annual gains in gross domestic product (averaging 4.2 percent) between 1973 — when the First Oil Crisis hit — and 1990.
• The second factor is that a large majority of new products that became popular over the past two decades were digital products such as cell phones, digital cameras, DVD players and personal computers. A simple comparison makes it clear that a digital camera has a far smaller impact on related industries than an automobile does.
• The third factor is that Japanese manufacturers in general — and electrical appliance makers in particular — now find themselves in dire straits because of stiff competition from rivals in South Korea, Taiwan and China.
Three years ago, in my book titled “Green Capitalism,” I wrote that the Japanese economy in the future would have to be driven by greater use of energy-efficient, eco-friendly products and more investments in energy-saving measures, and that the government therefore needed to take effective steps to encourage the spread of eco-friendly products and investment to promote energy saving.
I don’t think Prime Minister Naoto Kan followed my advice, but a piece of legislation that he had pushed for as one of the conditions for his resignation last year took effect July 1 — a law introducing the feed-in tariff system, which requires power companies to buy electricity generated from renewable sources at fixed prices.
On Oct. 1, another law came into force which imposed a new tax on fossil fuels to stop global warming, while the acquisition tax and the weight tax on fuel-efficient cars were reduced, effective April 1 and May 1, respectively, for a three-year period.
These measures have had instant effects, resulting in sharp increases in the sale of solar photovoltaic panels and of cars that get good gas mileage. The government appears to have obtained the means of securing financial resources to implement anti-global warming measures.
Still, I admit that my prediction three years ago — that increased use of eco-friendly products would become the driving engine of economic growth for Japan — did not prove completely accurate. Although the sale of solar panels nearly doubled on a year-to-year several months before the introduction of the feed-in tariff system, a fairly large portion of that increase was products from Chinese makers.
Imports accounted for a nearly 30 percent share of solar panels installed in Japan between April and June.
Sharp Corp., which until 2007 was the world’s top manufacturer of solar panels, now ranks fourth, while Q-Cells AG of Germany, the world’s No. 1 maker in 2008, went bankrupt in April and was subsequently purchased by a South Korean firm. Ironically, Germany is the pioneer of the feed-in tariff system to promote renewable energy.
Both Sharp and Q-Cells lost market share to Chinese and Taiwanese competitors, whose solar panels today account for most of the global market. Part of the huge losses reported by Sharp for the half-year through September was attributable to poor performance of its solar panel business.
Moreover, a less costly, high-performance and more lightweight lithium-ion battery technology — which holds the key to winning global competition in the electric vehicle market — once raised hopes of becoming one of Japan’s future key industries. In 2011, however, South Korea overtook Japan as the global market leader, taking a 39.4 percent market share against Japan’s 34.8 percent. Catching up fast is China with a 26.2 percent share.
Panasonic Corp. posted big losses in the six months through September due mainly to dismal sales of lithium-ion batteries, which are essential in the production of not only electric vehicles but also personal computers, smartphones and tablet computers.
On the other hand, Japanese firms like Toray Industries, Mitsubishi Rayon and Teijin Ltd. together hold more than 70 percent of the global market share in carbon fiber, which is expected to drastically reduce aircraft and vehicle weight and thereby improve fuel efficiency.
An auto body made of carbon fiber is said to weigh less than 10 percent of its steel counterpart. An electric car with a carbon- fiber body would run much longer per kilowatt of electricity. The lightweight body in turn will lead to smaller batteries.
According to a Dec. 2 report in the Nikkei daily, Teijin plans to invest ¥30 billion in the United States to build a plant for the large-scale supply of carbon fiber to General Motors Corp.’s auto body frames.
It is generally known that reverse engineering is easy in the case of machine products but becomes more difficult when it comes to chemical products like carbon fiber. I think I am not alone in hoping that Japan takes the global market lead in such environmental technologies.
Takamitsu Sawa is president of Shiga University.