• Bloomberg


Miyagi Gov. Yoshihiro Murai stands before a gathering in Tokyo of 300 representatives of the nation’s biggest companies and community organizations.

It’s his last stop of the day and his third visit to the capital in a month. Murai races through the high points of his 80-page plan to rebuild Miyagi, to raise it up from its devastation with the help of economic development. Suddenly, Murai pauses. His face breaks into a grin.

“We’re coming up with a lot of benefits for businesses in Miyagi,” he says. “So I hope you come before we run out of land.”

Murai, 51, has traveled to Tokyo on this day in late July to sell corporate Japan on his grand vision of remaking the ruined region. The one-time Self-Defense Forces helicopter pilot says he’s not drinking a drop of alcohol until the last of the 320,885 people who were evacuated from their coastal homes are able to move out of the prefecture’s emergency shelters.

Murai’s eye is already on something much larger and more daunting, however: turning Miyagi’s 200 km of wrecked coastline into the country’s most attractive investment spot. Murai says he wants to create a model economy in Miyagi that could be replicated in the 46 other prefectures.

Japan as a nation, like Miyagi and the Tohoku region, can’t afford to return to its predisaster trail of deflation and debt, he says in an interview.

“If things continue along the same path, Japan will sink,” he says.

The economy has been underwater for some time. The country’s strongest recorded earthquake slammed the economy after two decades of stagnation that saw nominal gross domestic product repeatedly rise only to fall back down from 1991 to 2011.

Prime Minister Yoshihiko Noda has inherited those two lost decades, a yen that has surged about 50 percent against the dollar in the past four years and a benchmark interest rate that has long stood near zero percent.

Murai’s prescription for the malaise is in line with what many critics of government policy have recommended. For years, economists have urged the central government to transfer power and grant more autonomy to local authorities, ease regulations that stifle business, wrest control of the nation’s farms and harbors from the powerful agriculture and fishery cooperatives and cut one of the world’s highest corporate tax rates.

Finance Minister Jun Azumi, who comes from Ishinomaki, a coastal city in Miyagi where more than 3,000 people died in the March disasters, has sent out some encouraging signals to Murai and the people of Miyagi.

“When there’s a disaster, we must not be stingy,” Azumi told reporters in Marseille, France, in September after meeting with his Group of Seven counterparts. And yet seven months after the disaster, the Diet has not passed any legislation that would turn Murai’s vision into reality.

In March, the state of the economy was a textbook example of a postbubble nightmare. China had overtaken Japan in 2010 as the world’s second-largest economy and government debt was set to grow to more than twice the size of GDP.

In the meantime, the country was preparing to dump its seventh prime minister in a decade, a pattern that had left few leaders in office long enough to articulate, let alone implement, a vision that would resuscitate the country.

Then, at 2:46 p.m. on March 11, the undersea earthquake struck 130 km off the shores of Miyagi. Minutes later, tsunami sirens sounded throughout the harbors that line the Pacific Ocean.

Within an hour, waves as high as 40 meters slammed the coast. Flipping over ships, uprooting trees, crushing homes and swallowing vehicles racing to outpace the tide, the black, debris-filled waves looked more like lava than water.

As of Friday, 15,822 people had died, another 3,926 were still missing, and in Miyagi, the hardest-hit area, the death toll stood at 9,488.

The tsunami flooded 561 sq. km of land from as far north as Aomori to as far south as Chiba, according to the land ministry. In the middle of the affected coastline stands Tokyo Electric Power Co.’s Fukushima No. 1 atomic power plant, where the waves knocked out the reactors’ cooling systems and unleashed the world’s worst nuclear crisis since Chernobyl.

Fishing and farming provide an income for one in every six households in coastal Tohoku cities such as Kesennuma, Miyagi Prefecture.

Noboru Onodera, who runs a sushi bar atop a hill in Kesennuma, feels the effects firsthand.

“Who’s going to eat sushi when all the jobs are gone?” Onodera, 58, says. “The future is total darkness. You look left and you look right, and all you see is debris.”

Japan’s previous major earthquake struck Kobe in 1995. The city missed the chance to remake what in the 1970s had been the world’s largest container port, says Makoto Iokibe, a historian and head of Hyogo Earthquake Memorial 21st Century Research Institute.

“Kobe remade the same port it had before, and it kept losing competitiveness,” says Iokibe, who’s now head of the government-appointed Tohoku reconstruction committee. “This philosophy of back to before restoration was a ridiculous waste. We can’t repeat that mistake.”

Murai’s vision won’t get far without a push from the central government. On Friday, Noda’s reconstruction headquarters announced an outline for the incentives it wants to give companies, local governments and residents within designated disaster areas.

Under the plan, a variety of regulations, including those pertaining to fishing licenses, would be eased, and local authorities would gain access to grants that fund infrastructure projects. Businesses would also be able to deduct from their corporate taxes 10 percent of the salaries they pay to disaster-affected employees and write off 100 percent of their machinery expenses for a year.

The central governments track record of political inaction does not bode well for Miyagi’s grand vision.

“Noda has indicated he wants to raise taxes, but he needs to actually get that passed in the Diet,” says Takayoshi Igarashi, a Tokyo-based professor of political science at Hosei University who was an adviser to former Prime Minister Naoto Kan.

Murai landed in Miyagi by accident 27 years ago. As an SDF pilot, he asked to be posted to Hokkaido. His instructor sent him to Miyagi. When Murai decided to change careers and go into politics after eight years of service, it wasn’t his birthplace or Tokyo that he chose to represent.

“I thought Tohoku was such a wonderful place from the sky,” he says wistfully. “I got this sense that it was on the verge of growth.”

Outside their sushi bar on a hill in Kesennuma, Noboru Onodera’s wife, Mikie, 60, clings to the hope that Murai will get his way.

“If companies really do come here, that will create more work,” she says. “What we lost was so huge, but maybe our gains will end up being greater. There was a time when this was such a prosperous place.”

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