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Energy costs keep Japan's focus on nuclear, despite risks and use of renewables

other plants remained closed for intensified safety checks

The issue is cost, and to a lesser extent, concern over a resurgence in climate-changing carbon emissions due to increased use of coal and oil to generate power. Clean energy still only accounts for 10 percent of total consumption — most of it hydropower. Much of the new capacity approved has yet to come online.

nuclear power remains essential, even with a surge in generation capacity from solar, wind and other renewable sources, and that the world's No. 3 economy cannot afford the mounting costs from importing gas and oil.

Japan has managed to avoid power rationing and blackouts. Industries have moved aggressively to avoid disruptions by installing backup generators and shifting to new sources, such as solar power.

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paying 30 percent more for electricity than before, with more rate hikes to come.

prompted a rethink of plans to raise nuclear capacity from one-third to over half of total demand.

Reliance on imported oil and gas has surged from about 60 percent of energy consumption to about 85 percent.

The recent weakening of the Japanese yen has added to the burden on the economy from oil and gas imports.

Abe and others in favor of resuming nuclear power contend that renewable energy is too expensive and unreliable — wind doesn't always blow, the sun doesn't always shine.

Apart from those issues, national security requires that Japan retain some self-sufficiency

Local communities are divided: many have relied heavily on nuclear plants for jobs and tax revenues, but worry over potential risks.

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We're also seeing radical efficiency gains.

he disposal and security of nuclear waste are issues yet to be resolved.

For now, however, it appears any phase-out of nuclear power will be very gradual.

"In the long term if we can create new resources that are more efficient than the current oil-based system, then we can rely less on nuclear power, that's quite possible," Adachi said. "But it will take quite a long time."

Higher inflation is a key aim of the economic policies of the country's prime minister, Shinzo Abe, who was elected in 2012

Japanese consumer prices are expected to keep showing steady headway towards the Bank of Japan's 2% inflation target. But the erosion of consumer spending power due to the sales tax increase – to 8% from 5% – underlines the need for long-stagnant wages to catch up with inflation to underpin consumption and help economic recovery.

The core consumer price index for Tokyo, available a month before the nationwide data, is likely to have increased 2.8% in April from a year earlier

Second, after a period of alignment, the monetary policies of these three large and systemically important economies are diverging, taking the world economy from a multi-speed trajectory to a multi-track one.

First, the United States is consistently outperforming Europe and Japan in terms of economic growth and dynamism – and will likely continue to do so – owing not only to its economic flexibility and entrepreneurial energy, but also to its more decisive policy action since the start of the global financial crisis.

With higher US market interest rates attracting additional capital inflows and pushing the dollar even higher, the currency’s revaluation would appear to be just what the doctor ordered when it comes to catalysing a long-awaited global rebalancing – one that promotes stronger growth and mitigates deflation risk in Europe and Japan.

ECB President Mario Draghi signalled a willingness to expand his institution’s balance sheet by a massive €1 trillion ($1.25 trillion).

Furthermore, sudden large currency moves tend to translate into financial-market instability.

There is also the risk that, given the role of the ECB and the Bank of Japan in shaping their currencies’ performance, such a shift could be characterized as a “currency war” in the US Congress, prompting a retaliatory policy response.

Today, many of these countries have adopted more flexible exchange-rate regimes, and quite a few retain adequate reserve holdings.

an appreciating dollar improves the price competitiveness of European and Japanese companies in the US and other markets

But a new issue risks bringing about a similarly problematic outcome: By repeatedly repressing financial-market volatility over the last few years, central-bank policies have inadvertently encouraged excessive risk-taking, which has pushed many financial-asset prices higher than economic fundamentals warrant.

This is not to say that the currency re-alignment that is currently underway is necessarily a problematic development; on the contrary, it has the potential to boost the global economy by supporting the recovery of some of its most challenged components. But the only way to take advantage of the re-alignment’s benefits, without experiencing serious economic disruptions and financial-market volatility, is to introduce complementary growth-enhancing policy adjustments, such as accelerating structural reforms, balancing aggregate demand, and reducing or eliminating debt overhangs.

The US dollar’s resurgence, while promising, is only a first step. It is up to governments to ensure that the ongoing currency re-alignment supports a balanced, stable, and sustainable economic recovery. Otherwise, they may find themselves again in the unpleasant business of mitigating financial instability.

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