I mentioned last week that the Prince Hotels group had opened rooms at its Grand Prince Hotel Akasaka to refugees from the tsunami. That got me thinking about the impact that the ongoing crisis and travel advisories is having on the hospitality sector.

The news isn’t good. Start with the Prince Hotels group, which even before the crisis was suffering from overcapacity, a legacy of bubble-era expansion. According to the Nikkei newspaper, the group is now reporting that 90 percent of reservations made by foreign visitors at its 44 hotels have been cancelled.

It’s perhaps cold comfort for Prince Hotels that it’s not alone: virtually the entire Tokyo hospitality sector has taken a severe hit, with no letup in sight. Even the Imperial Hotel, probably the most famous hotel in Japan, has revealed that occupancy is half the usual levels for this time of year. The Mainichi meanwhile is reporting that foreign arrivals at Narita in the 3 weeks following the March 11 earthquake were down 73 percent compared to the same time period last year—to just 3,390 people a day.

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When Prime Minister Naoto Kan gets to the point where he can begin work on his ‘New Japan’ pledge, he probably won’t have much trouble convincing the population of the need for reform. Even before the current crisis, few Japanese were satisfied with the status quo. The disagreement is over the nature of the reform.

Uneasy about upending existing institutions, conservative reformists (yes, they exist) have often favoured calls for Japan to embrace its traditional values. Journalist Yoshiko Sakurai is a good example. This isn’t unlike conservative calls elsewhere, but for Japanese the argument resonates because modern Japan’s sharply fluctuating fortunes have produced two relative golden ages: the Meiji period and the post-war economic ‘miracle.’ So it isn’t surprising that some commentators urge people to embrace values they feel were evident during those two periods.

Precisely what those values are and how exactly they could help Japan today are often left a little vague, but generally they include concepts of diligence, thrift, community-spirit, patriotism, and the like. The idea is usually that if people would just show the will of their forefathers, Japan will recover and go on to recapture past glories.

This argument may be about to get a boost, given the widely noted stoicism and community spirit demonstrated by the Japanese in response to their recent tragedies. Many Japanese outside the disaster areas have felt galvanized by a desire to help their country recover, and there’s evidence of a new spirit of altruism and community pride.

Nobody could argue that a stout heart and generous spirit aren’t traits worth having, nor that there’s nothing to learn from the achievements of the past. But as Japan begins to grapple with both the post-disaster restoration and the reforms the country has long needed, it’s going to have to rely on more than traditional values.

To start with an obvious point, the Japan of yesteryear wasn’t so great if you were a woman, disabled, a foreigner, a member of the underclass, or generally of an independent mind. And neither of the two golden ages ended well, ultimately resulting in militarism and recession, respectively.

Indeed, some traditional values seem downright unhelpful—it’s hard to see, for example, how traditional Japanese gender views are going to help solve the baby shortage, which requires alleviating the opportunity cost of childcare for modern, educated, and career-minded Japanese women. Or how traditional notions of individual thrift will assist a country whose primary fiscal problem is a lack of tax revenues. Or how relying on a hereditary elite—the sons and grandsons of politicians—can provide real political leadership.

Take monozukuri, a term that has entered the local lexicon in the past decade or so. It literally means ‘making things,’ but it is meant to connote a commitment to manufacturing excellence. It’s used very justifiably in celebrating Japan’s long tradition of craftsmanship. But it has been hijacked by certain policymakers and commentators, and touted as a cure-all for the challenges confronting Japanese industry. Rediscover our monozukuri, goes the thinking, and we’ll restore Japanese industrial pre-eminence.

The argument overlooks an inconvenient fact: post-industrial Japan is primarily a service economy. According to IMF figures, manufacturing in Japan accounted for just 21.9 percent of GDP in 2009. Only France had a lower figure. Services, by contrast, accounted for 76.5 percent. And many segments of Japanese manufacturing already boast enviable efficiency; the services sector, by contrast, lags OECD rivals, primarily because of a lack of openness and inadequate investment in IT. In short, a focus on craftsmanship is likely to do little for the Japanese economy.

In fact, look through the OECD’s excellent online economic database and you quickly realize two things. First, that Japan is very frequently an outlier—in debt, investment, birth-rate, immigration, and the employment status of women. And second, that other advanced economies are following in its footsteps; the fact that they aren’t quite where Japan is now can be largely explained by their higher immigration levels.

This suggests that Japan, for the first time in its modern economic history, is in the position of having to navigate uncharted territory. It needs to define and achieve success in the post-industrial era of low growth: low birth-rates, an aging population, rising entitlement burdens, declining demand, deflationary pressure, declining manufacturing, and climbing debt. It can of course make some progress with quick fixes—assuming the political will is there—such as corporatizing the farm sector, opening the services sector to foreign competition, and making it easier for women to balance kids and career. To its credit, the Kan administration has already tried to take some tentative steps in this regard, mostly notably with its plans to join the Trans-Pacific Partnership.

But for Japan to meet its long-term challenges of reining in its runaway public debt while restoring a measure of vibrancy to its economy, offering opportunity to its young and security to its old, it will need both traditional values and true policy innovation. In other words, look forward, as well as back.

If it manages to do that, it just may be a pathfinder for the rest of the industrialized world.

James Pach is the publisher of The Diplomat and the founder of Trans-Asia Inc., a Tokyo-based translation and investor relations company.

Are you a Japanese or Japan-based writer? If so, drop us a line. We’re putting together a small team of dedicated bloggers who can do justice to Japan's story.

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An unwelcome reminder of the ongoing challenges facing northeastern Japan has just come with another powerful aftershock, which was also felt here in Tokyo.

According to the Japan Meteorological Agency, the quake, which struck at 11.32 pm, had a magnitude of 7.4 (and measured an upper 6 on the Japanese Seismic Intensity Scale). It was centred in Miyagi Prefecture, which was the worst-hit region in the magnitude 9.0 Tohoku quake that struck last month. A tsunami warning has reportedly been issued.

Although not as powerful as the March 11 temblor, buildings here in Tokyo continued swaying for quite some time after the initial shaking had subsided, making it reminiscent of that earlier quake, when even outside the ground could be felt swaying under foot.

We'll keep you posted if there are any reports of significant damage, although it's far too early to know that. Stll, it's yet another test for a people that have shown remarkable courage until now.

Update: The tsunami warning has been lifted and there are no reports of major damage. TEPCO, which operates the stricken Daiichi nuclear power plant in Fukushima, added that there was no further damage to the reactors, although workers were temporarily evacuated.

A couple of readers have been in touch to talk about some of the stories emerging in Japan in recent weeks.

Asako Sotoyama, who lives in the United States, is concerned about the trouble mothers in the regions affected by the earthquake and tsunami are having getting clean water to make formula for their children. Even Tokyo mothers have had mild issues getting baby supplies, such as diapers, following the run on daily items. But the problem in the worst-hit areas is orders of magnitude greater, where supply shortages are exacerbated by fears of contamination. Other mothers are having problems breastfeeding because of the stress.

Asako and other concerned mums have been petitioning US firm Abbott Nutrition to donate supplies of ready-to-feed Similac Formula. No word on any response. There are customs issues apparently, and perhaps Abbott is distracted by its Similac recall.

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The destruction in the wake of Japan’s massive earthquake, tsunami, and nuclear crisis is expected to exceed $300 billion, although even that huge figure can’t take into account the loss of life and the suffering from this tragedy. Japan’s people are resilient and will once again show the world the will to rebuild their island nation. In doing so, however, they need to rethink their economic growth model and restructure their institutions to increase economic freedom and allow for ‘creative destruction.’

Some analysts have argued that Japan’s natural disasters create a unique opportunity to rebuild, generate economic growth, and eventually increase wealth. Yet, one shouldn’t forget how much better off Japan would have been without those disasters. Instead of replacing a destroyed home or factory with a new one, Japan could have used the same resources to add to its existing capital, and experience a net increase in real per capita GDP.

But unlike natural disasters, which always destroy wealth, the free market constantly shifts resources from less to more highly-valued uses as determined by consumers. Labour, capital, land, and other scarce resources naturally flow to where they are most profitable from consumers’ viewpoint. Jobs are created and destroyed in the process. But the newly created jobs for labor and capital have a higher value to consumers than those lost; hence, the term ‘creative destruction,’ coined by economist Joseph Schumpeter. 

Tokyo Electric Power Company isn’t having a good disaster. Following the catastrophic failure at its Fukushima I Nuclear Power Plant, the company’s management hasn’t exactly been an exemplar of crisis management.

We learned Wednesday that TEPCO President Masataka Shimizu, whose whereabouts over the last two weeks have been the subject of rampant speculation, has been admitted to hospital suffering from hypertension and dizziness. I’m sure he can count on happy thoughts from the irradiated workers battling at the power plant, their family members, and indeed most of the population of Fukushima.

Hospitalization timed to coincide with or anticipate a scandal has actually long been part of the crisis management playbook for certain Japanese politicians and senior executives. (To be fair, many of them are quite elderly.) So the news won’t do much to win the sympathy of TEPCO critics.

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As readers will have gathered, I have about 0.5 nanobecquerels of sympathy for TEPCO, which really has a sorry track record when it comes to transparency. But some of the criticism is beginning to seem a little misplaced. Take for instance the demands for more and more data from the plant. Of course, the more information the better, but nuclear researcher Peter Hosemann makes a valid point when he notes that the data needs to come from workers onsite, who right now have priorities that might preclude crawling into every radioactive orifice of the plant to satisfy the needs of armchair experts overseas. (The Diplomat has posted two very good interviews about Fukushima in recent days. The other one is here.)

I would also respectfully disagree with Forbes blogger Marc E. Babej, a marketing strategy expert who has taken a look at the English-language version of the TEPCO website. After quoting from the admittedly clunky English, Marc chastises TEPCO for not removing its corporate policies and sustainability report, which embarrassingly talk about the company’s commitment to safety and the environment. Apart from, again, the question of priorities (I mean, really, rewriting your foreign-language ‘2020 vision’ statements can wait a while), removing investor relations material because it’s now embarrassing raises disclosure questions. (My own disclosure: My firm provides these kinds of corporate communications services to many Japanese companies; TEPCO is not one of them.)

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The Diplomat speaks with nuclear researcher Peter Hosemann about the unfolding developments at the Fukushima nuclear power plant.

Media reports often talk of meltdowns or compare the situation at the Fukushima plant with what occurred at Chernobyl. Is there any chance at all there could be a radiation release on that scale?

At Chernobyl there was a nuclear explosion, whereas in this case we don’t have one, so the mechanism distributing radioactive material is on a much more localized scale. Is it a terrible accident? Yes, there’s no doubt about it. But with no nuclear explosion having taken place, it won’t be as dispersed as with Chernobyl.

So there’s unlikely to be a radiation threat to Tokyo?

At this point, from the information we have, I would say the danger to Tokyo would be small. There will be elevated radiation readings, there’s no question. But the question then is how much will there be? We’ve picked up radiation here in California. But just because we can measure it, doesn’t mean it’s particularly dangerous because we have very sensitive equipment. There will of course be higher radiation readings after what has happened, but as I said the question is how high they will be. At this point, the readings aren’t high enough to think about having to have people in Tokyo evacuated or anything like that. But there are many institutions and agencies monitoring the levels of radiation very carefully, and so they will put out the proper warnings if something changes.

What do you make of the level of information that has been made available by officials at the plant?

I think they’ve been doing what they can. At this point, they’re focused on dealing with the situation rather than providing information to the press. Would we like more information? There’s no doubt about it. But all the information that comes out of there has to come from the workers on site. Everything has to come from them, and I’m sure that these workers are more interested in getting the situation under control than they are in making sure information is widely provided. Also, information has to be checked – just because you have a reading doesn’t mean it’s right. And without being on site, of course, it’s hard to make accurate assumptions about what’s really going on.

What have you made of the media coverage in the US?

It depends obviously on which media. I think considering that thousands of people died in the earthquake and tsunami—and that many, many more are in need of help—that as bad as the nuclear situation is, there’s no question that the problems at Fukushima are only a small part of the disaster that is going on. I would like to see from the media more coverage of this part of the disaster. The situation in Fukushima is no doubt dangerous and very visible, but the much bigger losses from the earthquake and tsunami should be covered in a wider way.

It was announced yesterday that plutonium was found in soil samples near the plant. How worrying is this and what are the implications?

The first question is how sure can we be about those results? If it’s true, this means that fuel and core material is coming out of the reactor and it needs to be established how it got there so further leaking can be avoided.

Was it simply a mistake for Japan to rely so heavily on nuclear power when it is seismically active? Do you think the nuclear industry in Japan and globally can recover from this?

Obviously I can’t comment much on the political situations and choices a country makes. But for a country with very few natural resources, nuclear power is still a very good option—it makes a country more independent than gas or coal would. Should there have been better safety measures in place for this event? Oh yes, of course. But many countries and people will learn from all this to improve existing plants and in the building of new ones.

Peter Hosemann is a nuclear researcher at the Los Alamos National Lab at the University of California Berkeley.

A very sad item (in Japanese) in the Asahi this morning. A 64-year-old cabbage farmer from Fukushima has killed himself, apparently after being told by the government that he wouldn’t be able to sell his crop because of fears of contamination from the nearby Fukushima I Nuclear Power Plant. The man had been a highly dedicated farmer, growing a prized organic cabbage. For years, he’d been particularly careful about keeping toxic chemicals out of his cabbages, because they were consumed by elementary school children. The farmer had lost his home and storage facility in the quake, but he had preserved his crop and was keen to sell it. His family makes it clear they blame ‘nuclear power.’

It’s yet another dimension to the tragedy unfolding in Japan, and a hint of the problems that await TEPCO.

Meanwhile, in another item involving cabbages, thieves in Saga prefecture have reportedly made off with 1200 heads of cabbage. I guess it was a matter of time before we saw a crack in the astonishingly orderly Japanese response to this crisis, but who would have thought it would be over something like this?

James Pach is the publisher of The Diplomat and the founder of Trans-Asia Inc., a Tokyo-based translation and investor relations company.

Are you a Japanese or Japan-based writer? If so, drop us a line. We’re putting together a small team of dedicated bloggers who can do justice to this story.

This blog you’re reading used to be called Tokyo Notes. That might have been my choice, a fairly bland name for a blog we’ve always found a little difficult to position. Tokyo Notes was blessed with some fine writers, but covering Japan policy has always been somewhat dispiriting.

For two decades, Japan has been mired in the quicksand of torpor. The reasons have been well covered. During the 1990s, the nation struggled with a debt hangover, the morning after the party that was the late 1980s. In the 2000s, the problem was more pernicious: a population decline that has nearly every business in a state of constant overcapacity, stifling investment and growth.

In essence, the same policies that turbocharged Japan’s postwar industrialization—women as the welfare state, neo-mercantilism, coddled industries, close government-industry ties—have shot it to the very forefront of the post-industrial world, a country dominated by an inefficient services sector, with no organic population growth and minimal immigration, and powerful vested interests strongly resistant to change.

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