Reviews, Commentaries, etc. - NOMURA Koji

Thinking Energy

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2020.06

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Labor Productivity and Energy

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2020.05

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Environmental Policy by Voluntary Action and Impacts on Industry Competitiveness

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2020.04

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

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In February 2020, it was reported that the Kure steelworks in Hiroshima Prefecture would be closed. Two blast furnaces operated by Nippon Steel Nisshin would be shut down, with the crude steel processing operations also to be closed by 2023. A major reversal of direction announced just two months after the corporate disclosure speaks to the anguish behind the decision, taken against a backdrop of stagnating global demand caused by the U.S.-China trade conflict. Kure is the third-largest economic city in Hiroshima Prefecture, accounting for approximately 10% of the prefecture's gross domestic product, with a dependence on manufacturing of 48% — far exceeding that of Hiroshima City (17%) and Fukuyama City (31%). The steel industry accounts for 27% of the gross value added by Kure's manufacturing sector, underpinning roughly 12% of the city's GDP. The closure of the steelworks, including its impact on related industries, will likely inflict damage two to three times that scale. Nippon Steel itself is reported to be facing a loss of 440 billion yen, following an impairment charge of 490 billion yen. To compete in global markets, it is necessary to endure such pain in order to raise production efficiency and expand the share of production closer to growing consumption centers. By 2030, Japan's GDP will have shrunk in relative terms to approximately 4% of world output. Putting an end to Japan's prolonged economic stagnation is impossible without transforming into globally competitive enterprises. Government support is indispensable to cushioning the pain for regional economies, but the greatest asset is the human talent cultivated at the steelworks being closed. One can only hope that the steelworkers who remain in the region will found new businesses and drive the local economy forward. The day before the closure was reported, the Low Carbon Society Action Plan Follow-up Committee of the Ministry of Economy, Trade and Industry held discussions on the steel industry's efforts to reduce CO2 emissions. Yet concerns about carbon leakage proved difficult to dispel. As the technical possibilities for higher efficiency and higher utilization rates become increasingly constrained, if the hurdles to be cleared are set high only within Japan, companies will opt for overseas production when making reinvestment decisions. Is the blast furnace closure not, in fact, a decision made under competitive conditions distorted by current energy and environmental policy? Whether the pain being inflicted on industry, regions, and the macro economy is truly necessary must be asked. The EU has constructed a list of industries exposed to the risk of carbon leakage under its emissions trading scheme, granting eligible industries a substantial number of free emissions allowances. Careful measures against leakage are indispensable to avoid inflicting unnecessary pain on the macro economy. Voluntary action as an approach to environmental policy carries a fatal flaw: it obscures the disparity in competitive conditions between domestic and foreign producers. It also carries the risk of concealing the factors behind Japan's low economic growth and presenting domestic emissions reductions as if they were the fruits of environmental policy success or corporate effort. Japan's capacity to identify its national interest from the perspectives of corporate strategy, environmental policy, and economic growth is being put to the test.

Market Design of Art in Japan

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2020.03

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"2019 Project Report on Measuring Industry-Level Productivity Account in JSNA"

Koji Nomura

Economic & Social Research, ESRI, Cabinet Office (Keio Economic Observatory, Keio University)   2020.03

Rapid communication, short report, research note, etc. (bulletin of university, research institution), Single Work

Deflation and Increasing Vulnerability to Energy Price Fluctuations

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2020.02

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"Wholesale and Retail Service Price Indices in Japan: Retrospective Measurement from 1955"

Koji Nomura

RIETI Nontechnical Summary (RIETI)   2020.02

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"How Can Measurement of Benchmark Production Systems be Improved? – The Structure of Secondary Products by Main Activity based on the Survey on Diversification of Sales in Japan"

Koji Nomura

RIETI Nontechnical Summary (RIETI)   2020.02

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Low Economic Growth and Quality of Investment

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun)   2020.01

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Another Loss of Personnel due to Fukushima Nuclear Accident - Degradation on GDP Estimates

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2019.12

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

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In economics statistics classes, students sometimes ask whether Abenomics led to an overestimation of GDP, but the reality is that if anything, GDP has been underestimated. There is a debate around Japan's input-output tables — the foundation of Japan's GDP statistics — arguing that this "Galapagos-style mammoth statistical framework should be simplified to match European and American standards," but this argument rests on a serious misunderstanding. An input-output table is a matrix describing the production and demand structure of an economy as a whole, constructed through intensive statistical surveys in a benchmark year conducted every five years. Japan's input-output tables are sometimes criticized as "Galapagos" for their granular classification of 520 commodities by 400 industries, but in fact the U.S. Bureau of Economic Analysis (BEA) uses an even finer classification running to 5,000 commodities — albeit unpublished. The disaggregation of input-output tables is not a hobby pursuit; its purpose is to approximate the technical relationships between products and industries. At the level of granularity represented by products such as heavy fuel oil and coke, the industries that use them can be identified with greater precision, and a design that makes use of such complementary information is indispensable for describing the economy as a whole without internal contradictions. If one imagines how difficult it is to measure a nation's total GDP, the challenges of statistical construction become clear: declining survey response rates, missing or inconsistent answers, and the increasingly diversified business activities of corporations all compound the difficulty. The foundation of GDP statistical construction is an understanding of productive structure, and the central role in Japan's input-output tables has been played by the Input-Output Division (IO Division) of the Economic Analysis Office within the Ministry of Economy, Trade and Industry. The successive heads of the division have maintained a high level of professional commitment — refusing to take potentially error-laden figures at face value, sensing discrepancies between the statistics and actual economic conditions, and engaging in dynamic quality management. With the advance of outsourcing to the private sector, however, only perfunctory quality control devoid of passion remains, and the pursuit of structural changes in the survey population has been lost. The nuclear accident then delivered the decisive blow. Personnel within the ministry were mobilized for accident response, and invaluable statistical expertise was lost. The IO Division no longer exists as such; it has been absorbed into a Survey and Analysis Support Office, where it is grouped together with dissemination, public relations, and website management functions. This means that the "guardian" of Japan's input-output tables is being lost. Even if there are discrepancies in the levels of the benchmark year, GDP statistics for subsequent years are estimated by linking to that base, so the problem goes unexamined — a Pandora's box, in effect. Preliminary estimates suggest that in recent years production has been underestimated across various sectors, with figures likely missing by as much as 10 trillion yen in commerce and 5 trillion yen in manufacturing. A mature opposition party, rather than simply crying "fabrication," should be questioning the adequacy of GDP measurement itself. Under a framework of private-sector utilization focused solely on checking procurement documents for deficiencies, no passion can be cultivated, and the quality of the information infrastructure built by one's predecessors cannot be maintained. What is needed once again is a distinctly human way of working — thinking for oneself, using AI as a complement, and finding genuine enjoyment in the discovery of problems.

Development of Hydropower Plants by Yukichi and Momosuke Fukuzawa

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2019.08

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

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The Oi Dam and power station on the Kiso River system were completed by Momosuke Fukuzawa at the end of 1924. This great undertaking — achieved by harnessing imported American technology and capital to tame the torrential Kiso River, long deemed "impossible to control" — continues to create enduring value nearly a century later. Yukichi Fukuzawa, Momosuke's father-in-law, introduced the advances in hydropower technology being made in Britain and Germany in his work "Jitsugyo-ron" (On Business, 1893), illuminating a path by which Japan might develop its productive industries. He observed that Japan's "swift currents and waterfalls, a heaven-sent treasure," could be transformed into productive assets, and presciently identified the utilization of electricity — then "in the midst of its development" — as "a matter of truly paramount importance for an industrializing society." Just as Sam Schurr called electricity the "mediator of technological progress," electrical energy was indispensable to the productivity improvements and economic growth of the twentieth century — and Fukuzawa had already seen this essence a hundred years before. Fukuzawa's assessment was not mere optimism but was grounded in analysis. He reasoned that nations without access to hydropower and dependent solely on coal-fired generation could not hope to compete on price with mountain countries endowed with the natural force of swift rivers and waterfalls, foreseeing that hydroelectric power could be substantially cheaper than alternative means of generation and could make a major contribution to improving Japan's international competitiveness. Momosuke was a singular entrepreneur who translated insight into action. Alongside hydropower development, he established a specialty steel manufacturing company using electric arc furnaces as a means of utilizing surplus power, and constructed transmission lines to the Kansai region — a vision that extended to the public benefit of society as a whole. From the Meiji era through the early Taisho period, the emergence of large-scale electricity consumers transformed the structure of power supply through the market, shifting from small-scale, fragmented supply responding to dispersed lighting demand toward the pursuit of economies of scale in large-scale generation and bulk transmission to consumption centers. There are two kinds of infrastructure formation. The first is that which is called for once bottlenecks in the economic and social system have become conspicuous. The second is the "business-creating" type — one that envisions a future capable of dramatically improving the prosperity and efficiency of economic society even before direct demand has materialized, making new private enterprise possible. The latter is far more difficult, and cannot be achieved without the fortunate convergence of superior insight, entrepreneurial spirit, and historical circumstance. How would Fukuzawa and Momosuke view today's Japanese electricity market? Was electricity liberalization induced by structural changes in demand or technology? Does the promotion of solar power through the feed-in tariff system for renewable energy encourage the utilization of untapped resources in which Japan holds an advantage, and thereby improve the international competitiveness of its industries? One imagines that Fukuzawa would point to the weakness of logical justification in both cases and argue against reckless haste, while Momosuke would show not the slightest interest in entering the new power retail or mega-solar business. The rapid accumulation of high-cost solar generation has not become business-creating infrastructure, and has left the public with liabilities exceeding the value it will generate in the future. Where, one wonders, would Momosuke's gaze turn today?

”Energy Productivity Improvement and Invisible Structural Changes”

Koji Nomura

RIETI コラム (RIETI)   2019.06

Article, review, commentary, editorial, etc. (bulletin of university, research institution), Single Work

Energy Productivity Improvement and Invisible Structural Changes

Koji Nomura

RIETI Column (RIETI)   2019.06

Article, review, commentary, editorial, etc. (bulletin of university, research institution), Single Work

Economic impacts of non-nuclear power policy in South Korea

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2019.05

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

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Over the past thirty years, the Korean economy has achieved the upgrading of its manufacturing sector and improvements in productivity by drawing on affordable electricity supply as a source of competitiveness. The foundation for this has been an energy policy centered on nuclear power and coal-fired generation. Nuclear power, which began commercial operation in 1978, expanded rapidly, reaching a generation share of 53% by 1987. With nuclear and coal together accounting for more than 70% of electricity demand, industrial electricity prices fell to roughly half those of Japan — a substantial competitive advantage. In the 1970s there was no significant gap between Japanese and Korean electricity prices, but the rapid expansion of nuclear power brought Korean prices down to half Japan's level by 1987. Against this backdrop of affordable electricity, the Korean economy has exhibited two defining characteristics. The first is a rapid structural transformation from light industry to machinery manufacturing; the second is the swift improvement in macro-level productivity that accompanied it. In the early 1980s, Korea's total factor productivity was only about 60% of Japan's, but rapid catching-up narrowed the gap to roughly 15% by 2011. Affordable electricity supply was the cornerstone of the productivity improvements needed to raise per capita income to the next level. From 2011 onward, however, a turning point arrived. The Moon Jae-in administration pursued policies of phasing out nuclear power and coal, advancing the closure of aging coal-fired plants and scrapping plans for new reactor construction. Nuclear plant utilization rates fell from over 90% to 66% in 2018, and the industrial electricity price gap between Japan and Korea narrowed to 30–40%. Korea Electric Power Corporation swung to an operating loss, and the productivity gap between Japan and Korea, after peaking in 2011, has begun to widen again toward nearly 20%. This situation mirrors Japan's own experience twenty years ago. A reckless energy transition undertaken against a backdrop of rising cost burdens on coal-fired generation due to air pollution countermeasures, and the advancing challenge of Chinese competitors, will significantly undermine Korea's medium- and long-term growth capacity. Japan-Korea cooperation on shared challenges — including strengthened nuclear safety measures, the nuclear fuel cycle, and final disposal — may well be the path toward guiding the Asian economy to prosperity.

Borrowed Technology and Unintended Energy Productivity Improvement

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2019.02

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

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The government is aiming, with an eye to 2030, to achieve energy conservation at the pace Japan realized in the aftermath of the oil shocks. Yet ambitious energy-saving targets do not necessarily imply their own feasibility. As other instruments — declining nuclear dependence, the scaling back of coal-fired generation, and surging electricity prices driven by the push for renewables — have reached an impasse, energy conservation has returned as the central policy challenge. There are expectations that energy saving will enhance corporate competitiveness and drive economic growth, but that was the story of an era when cheaply available technologies were abundant. Today, the costs required to achieve further energy savings frequently exceed the savings in capital and labor they generate. Subsidy-driven promotion is expedient for both government and industry, but it lowers the social return on investment. The purpose of this paper is to draw lessons from historical experience for the efficient pursuit of energy conservation. In the years from 1973 to 1990 following the first oil shock, Japan's energy productivity improved at a remarkable annual rate of 3.1%, a period known as the "golden age" of energy conservation. This figure, however, contains distortions inherent in macro-level measurement. Because energy-intensive industries such as steel and chemicals contracted relative to the rest of the economy after the oil shocks, energy conservation tends to be understated for the high-growth era and overstated for the golden age. According to the author's estimates corrected for industrial structural change, the true rate of energy conservation improvement during the high-growth era is revised upward to 2.0% per annum, compared to the apparent rate of 1.4%. This reflects what economist Gerschenkron identified as "borrowed technology" — technological progress enjoyed unintentionally through investment in imported machinery and equipment from abroad — and represents "unintentional" energy conservation. Conversely, the true rate of improvement during the golden age is halved to 1.5% per annum from the apparent 3.1%, and a comparison of the periods before and after the oil shocks reveals that "unintentional" energy conservation in fact exceeded "intentional" conservation. From 1990 to 2008, the apparent rate of energy conservation improvement slowed sharply to 0.8% per annum, with three quarters of that slowdown explained by the relative contraction of energy-intensive industries. The true rate of conservation improvement, after correction, was a mere 0.1% per annum. Despite the strengthening of energy-saving measures including the entry into force of the Kyoto Protocol, and despite surging crude oil prices, virtually no real progress in energy conservation was achieved. Over the same period, the United States kept its slowdown in conservation improvement limited and narrowed the productivity gap with Japan. The first lesson is that the pace of energy conservation is constrained far more by the availability of cheaply usable technologies than by rising energy prices. In the early stages of growth, energy conservation is naturally embedded through production expansion and capital reinvestment. The effect of energy price increases in inducing conservation is, however, already limited, and pricing energy consumption and CO2 emissions may prove to be an inefficient policy instrument. The second lesson is that even without policy-driven "front-loading" of energy conservation, when the time for capital reinvestment arrives, available energy-saving technologies will be embodied in new machinery and incorporated as a matter of course. As the Japan-U.S. comparison demonstrates, even when Japan takes the lead in adopting the latest high-cost technologies, once those technologies become cheaper, they will naturally diffuse through reinvestment in other countries. Within twenty years, machinery reaching the end of its economic service life will be replaced by capital goods embodying energy-efficient technology. The pursuit of energy conservation now has a history of nearly half a century, and the race has become one of diminishing returns. The value of expending large resources for a modest lead is limited, and the contribution to global greenhouse gas reduction remains marginal. High energy cost burdens also serve as a guarantee of high returns in research and development of future technologies. What is now required is a fundamental reframing of the time horizon for energy conservation promotion — shifting from a year-by-year perspective to one measured in decades.

"2018 Project Report on Measuring Quality-adjusted Price and Quantity of Education Outputs in Japan"

Koji Nomura

Economic & Social Research, ESRI, Cabinet Office (Keio Economic Observatory, Keio University)   2019.02

Rapid communication, short report, research note, etc. (bulletin of university, research institution), Single Work

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日本の国民経済計算体系（Japanese System of National Accounts： JSNA）では、「統計改革の基本方針」（平成28年12月経済財政諮問会議決定）および「統計改革推進会議最終取りまとめ」（平成29年5月統計改革推進会議決定）などに基づき、教育サービスの精度改善および国際的な比較可能性の向上を目的として、教育の質の変化を反映した産出指数（quality-adjusted quantity index）および価格指数（quality-adjusted price index）の開発が求められている 。本調査研究ではそのために必要な新たなデータベースを構築した上で、産出数量法、投入法、そしてハイブリッド法といったさまざまなアプローチに基づく試算をおこない、教育サービスの望ましい数量と価格の測定量を模索することを目的としている。

Bhutanese Economic Growth Led by Hydropower

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2018.10

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

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This article examines Bhutan’s hydropower-led growth model and evaluates its sustainability and underlying economic risks. Bhutan has achieved rapid economic growth while relying almost entirely on renewable energy, and has often been regarded as a model of green growth. Hydropower development plays a central role in this model, generating substantial export revenues through electricity sales to India and forming a major source of government income. However, the construction of productivity statistics and subsequent analysis reveal that hydropower-driven growth does not necessarily translate into improvements in overall economic efficiency. Although labor productivity has increased significantly, this growth has largely been driven by massive capital accumulation, while improvements in total factor productivity (TFP) remain negligible. Moreover, hydropower construction generates limited domestic employment, and the capital-intensive investment structure has led to distortions in resource allocation. Additional structural vulnerabilities arise from Bhutan’s heavy dependence on electricity exports to India, the peg of its currency to the Indian rupee, rising construction costs, and environmental uncertainties such as changes in Himalayan water flows. While Bhutan’s hydropower-led development strategy has delivered rapid economic growth in the short term, it also exposes the economy to long-term risks related to capital inefficiency and a lack of industrial diversification.

What is Required for Realizing Innovation?

Koji Nomura

Monthly Energy Forum (Energy Forum Inc.)   2018.08

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

What should be Japan’s future energy mix?

Koji Nomura

The Japan News (The Yomiuri Shimbun)   2018.07

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Japan's Electricity Mix

Koji Nomura

Yomiuri Shimbun (The Yomiuri Shimbun)   2018.06

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work