Reviews, Commentaries, etc. - NOMURA Koji

What Did Japan's FIT Bring About?

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2018.06

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

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"With this much power being generated on a sunny day, electricity prices should come down, shouldn't they?" — the smiling remark of a student reveals a fundamental misunderstanding of the FIT system (Feed-in Tariff for renewable energy). Sunlight pouring down may be a gift of nature, but converting it into electricity requires equipment installed under the FIT scheme, and the costs of that equipment are imposed on electricity consumers. Even though solar panel module prices were expected to fall over time, the decision to accelerate their deployment has produced a hefty bill that will be passed to current and future consumers. What has the FIT system, introduced in October 2012, actually delivered for the Japanese economy? Before the system was introduced, the government estimated that total purchase payments in its fifth year of operation would amount to around 500 billion yen annually. By fiscal 2017, that figure had expanded to 2.7 trillion yen, and is projected to reach 3.1 trillion yen in the current fiscal year — already equivalent to two thirds of the nation's entire general road construction budget. In the government's projections drawn up in 2015, the restart of nuclear plants was expected to reduce generation costs by around 4 trillion yen per year, providing the financial basis for promoting renewables and achieving a low-carbon, diversified energy mix without raising electricity prices. That anticipated funding base, however, is already close to running dry. Moreover, the FIT system has done nothing to strengthen the competitiveness of domestic solar panel manufacturers: the domestic content rate for solar cells and modules, which stood at around 80% before the system's introduction, plummeted to roughly 30% shortly afterward, and high import dependency has remained essentially unchanged to this day. Did the demand created by the FIT contribute to a fall in solar panel prices? In 2008, The Economist offered a scathing critique of Germany's FIT promotion. Despite being one of the countries in the world with the least solar irradiation, Germany's aggressive pursuit of the FIT drove up silicon prices, making adoption more difficult in countries with far greater solar resources. After Germany strengthened its FIT in 2004, silicon prices rose by nearly double, and the retail price of solar modules — which had been falling at an annual rate of around 4% — turned upward in 2004. When Japan introduced its FIT in 2012, the rapid surge in Japanese demand came to the rescue of Chinese manufacturers sitting on large surplus production capacity, and export prices to Japan actually rose. In the first quarter of 2013, Japan's import prices shifted to an annualized increase of 15%. Conversely, when the direction of amendments to the FIT law became clear in the third quarter of 2016, import prices recorded a sharp annualized decline of 50%. Setting high purchase prices exerts an upward pull on market prices, and what is needed for healthy market formation is not hasty deployment but sustained, measured demand expansion. The cost of renewables is increasingly dependent on domestic services such as construction and distribution rather than equipment itself, and high service prices reflect Japanese consumer preferences — meaning that even if other countries come to enjoy cheaper renewables, their conditions are not comparable to Japan's. The government has been shifting its focus toward the use of storage batteries, hydrogen storage, and related technologies, but it must not forget that the attractive future scenarios being sketched rest on a foundation of very substantial cost burdens already accumulated.

Energy Productivity and Industrial Changes

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2018.03

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

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The EU has placed Efficiency First — improving energy efficiency as the top priority — at the core of its energy policy, targeting a reduction in energy consumption of 27–30% compared to a business-as-usual scenario by 2030. Germany has set an ambitious target of reducing energy consumption by 50% by 2050 (relative to 2008) alongside a major push for renewables, claiming this will in fact strengthen industrial competitiveness and contribute to economic growth. Germany's target corresponds to an average annual reduction in energy consumption of around 1.5% from 2015 onward, requiring a sustained average annual improvement in energy productivity of around 2.5% — roughly one percentage point above recent actual performance. The term "energy conservation," born in the era of the oil shocks, carried from the outset a character in which efficiency improvement was difficult and dependence on reductions in activity levels was inherent. During Japan's high-growth era, vigorous capital accumulation embodying energy-saving technologies produced substantial improvements in energy productivity, but once the catch-up process was complete, further efficiency gains came to require greater inputs of labor and capital. Improving productivity in the single dimension of energy thus imposes a burden in the form of declining labor and capital productivity, and when energy conservation is pursued excessively, the latter burden can exceed the former, reducing overall productivity. A second problem is the fallacy of composition. Improving energy productivity reduces energy demand, which through lower market prices, enhanced competitiveness, and new production expansion tends to push up aggregate energy consumption — the rebound effect known as the Jevons paradox. In recent years, some EU countries have shown a declining trend in energy consumption itself, but the underlying causes require careful examination. Energy productivity as observed at the macro level is a measure that incorporates changes in productive structure. Germany achieved an efficiency improvement of 1.5% per annum between 2000 and 2015, but when measured with industrial structural change controlled for, true energy productivity improvement falls to just 0.4% per annum. This means that more than two thirds of the apparently observed improvement in energy productivity is explained by structural changes such as the contraction of energy-intensive industries and the expansion of the service sector — not by improvements in energy intensity at the level of individual firms or production processes. The conditions in which cheap energy-saving opportunities remain abundant can no longer be assumed, and the marginal cost of reducing consumption by one additional unit is indeed rising. Over this period, German households bore a disproportionately large share of the costs of renewable energy promotion and faced rapidly rising electricity prices, while electricity-intensive companies were exempted from these burdens. Whether such preferential treatment constitutes an acceptable level playing field relative to countries such as Italy that have no such exemptions, and whether energy-intensive industries can be expected to pursue conservation when their electricity prices are in fact falling, raises serious questions about the internal consistency of current energy policy.

Towards Revision of GDP - Measurement of Qualities in Education and Medical Care Services

Koji Nomura and Shigeru Sugihara

Economic & Social Research, ESRI, Cabinet Office  2017.12

Article, review, commentary, editorial, etc. (other), Joint Work

Energy Transitions in Germany and Japan

Koji Nomura

Energy Policy Report (Energy Forum Inc.)   2017.11

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

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At the start of this year, I visited the Takahama Nuclear Power Plant. Achieving the government's target of a 20–22% share of nuclear power generation by 2030 requires the restart of plants with enhanced safety measures and the extension of their operating periods, but at the time of my visit the plant had been shut down by a provisional injunction from the Otsu District Court following its restart. The rise in electricity prices and supply uncertainty since the earthquake disaster have been factors suppressing domestic investment and shifting electricity-intensive production overseas, and restoring affordable and stable electricity supply would improve investment opportunities in regional economies. Around the same time, I visited Berlin. The meetings of the Japan-Germany Energy Transition Council were charged with enthusiasm for the Energiewende — the great transformation — aimed at raising the share of renewables, already expanded to over 30%, to 50% by 2030 and 100% by 2050. The driving forces behind this are the decision to phase out nuclear power by 2022 in the wake of the Fukushima accident, and the challenge by citizens to build a decentralized system in opposition to monopolistic utilities. Germany's electricity-intensive companies benefit from wholesale electricity prices made cheaper by the large-scale introduction of renewables, with exemptions from the surcharges, while the overall cost increase falls heavily on household electricity bills. Yet criticism of the status quo falls flat before German researchers. One senses a positive resolve that the challenges should be overcome through the research and development they necessitate and through the expansion of market mechanisms. The promotion of renewables has reportedly become a new arena of challenge for retirees in their later years, and through collaboration with younger generations it has begun to function as a catalyst for value creation. Even the taxi driver on the way back smiled and said, "After seeing Fukushima, Germany decided to phase out nuclear — we knew we'd have to bear some burden." The economic trajectories of Japan and Germany in recent years stand in sharp contrast. Since 2000, Germany's average annual growth rate has exceeded Japan's by roughly 0.4 percentage points, with half of that strong performance supported by expanding external demand. The IMF has estimated that the euro undervalues Germany's effective exchange rate by 10–20%, which — drawing an analogy to Japan — is equivalent to maintaining price competitiveness over the long term through a yen depreciation to around 125 yen to the dollar. Japan, by contrast, has seen the return on domestic investment continue to languish, and the gap in productivity relative to leading economies has widened. The expansion of inefficient investment, such as in high-cost renewables, raises serious concerns about depressing future returns, and a virtuous cycle is needed — one in which investment opportunities with high returns are selected and linked to the creation of new investment opportunities. Affordable and stable electricity supply is an indispensable foundation for growth. The respective challenges of Japan and Germany in energy transition reflect differences in their economic environments. For Germany, where labor-management coordination has held down wages, it is desirable to seek a form of transition that expands domestic demand even if returns are modest. Japan's current circumstances, however, are unlikely to permit the same approach.

Productivity Measurement and International Comparison

Koji Nomura

Economic Seminar (Nihon Hyoron Sha)   2017.08

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

"Are Japan's Wholesale and Retail Prices Higher than Those in the United States? Estimation of margin rates using microdata from the Census of Commerce"

Koji Nomura and Kozo Miyagawa

RIETI Nontechnical Summary (RIETI)   2017.04

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

Benchmark Revision of GDP in JSNA (6)For the Next Benchmark Revision

Koji Nomura

Nihon Keizai Shimbun (Nikkei Inc.)   2016.09

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

Benchmark Revision of GDP in JSNA (5)Capital Services

Koji Nomura

Nihon Keizai Shimbun (Nikkei Inc.)   2016.09

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

Benchmark Revision of GDP in JSNA (4)Labor Share

Koji Nomura

Nihon Keizai Shimbun (Nikkei Inc.)   2016.09

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

Benchmark Revision of GDP in JSNA (3)Military Equipment

Koji Nomura

Nihon Keizai Shimbun (Nikkei Inc.)   2016.09

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

Benchmark Revision of GDP in JSNA (2)Capitalization of R&D

Koji Nomura

Nihon Keizai Shimbun (Nikkei Inc.)   2016.09

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

Benchmark Revision of GDP in JSNA (1)JSNA based on the 2008 SNA

Koji Nomura

Nihon Keizai Shimbun (Nikkei Inc.)   2016.09

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

Electricity Price under the Electricity Deregulation in Japan

Koji Nomura

Yaku (Kansai Electric Power)   2016.04

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

On Revision of Japan's Feed-in-Tariff Law

Koji Nomura

Monthly Keidanren (Keidanren)   2016.04

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

「危机后的亚洲生产率走势」

Koji Nomura

China External Environment Monitor (中国社会科学院)   2016.01

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

Productivity Trends in Asia after the Global Crisis

Koji Nomura

VoxEU CEPR's Policy Portal (VoxEU)   2015.12

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

「世界金融危機後のアジア経済における生産性の動向」

Koji Nomura

RIETI コラム (RIETI)   2015.10

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

「日米間産業競争力の半世紀－1955-2012年の価格水準指数と生産性ギャップの分析」

Koji Nomura

『RIETI Highlight (Fall 2015) 』 (RIETI)   2015.10

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

Trade Agreements and Trans-Pacific Competition

Dale W. Jorgenson, Koji Nomura, and Jon D. Samuels

VoxEU CEPR's Policy Portal (VoxEU)   2015.07

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

"Japan's Electricity Mix in 2030" (in Japanese)

Koji Nomura

Showa Keizai (Showa Keizai Kai)  66 ( 5 ) 51-56 2015.05

Other, Single Work