No wonder the likes of Fitch Ratings and Moody's, one of its rivals, are increasingly wary of the impact of the Fukushima nuclear power station crisis in Japan.

No only is it proving to be much harder to control (with radiation still leaking, water contamination continuing), with the target date for shutting the reactors now well into next year, but the financial cost continues to escalates.

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In fact there is now a cost estimate in Japan that suggests the bill for stabilising and cleaning the site could approach $US250 billion, or close to the cost of cleaning up and rebuilding the damage in the northeastern coast of the country from the March 11 quake and tsunami.

Most current cost estimates suggest that could be up to $US300 billion, give or take $US50 billion. That means the total cost of the disasters and their clean up would be close to 10% of the country's current Gross Domestic Product.

But some of those early estimates assumed some of the money would be spent on Fukushima.

No wonder Fitch has Japan's credit rating outlook on a negative footing and Moody's looks like cutting that rating (to bring it into line with those of its rivals).

At that level of spending, Japan's debt could explode over the next five to 10 years unless the country takes tough decisions to boost taxes and cut spending elsewhere.

The latest estimate was reported in various Japanese media yesterday and came from Kazumasa Iwata, president of the Japan Center for Economic Research.

The estimate is part of Japan's Nuclear Safety Commission's ongoing survey of opinions on the disaster from nuclear and other experts.

Mr Iwata said the costs of the accident could range from nearly $US71 to $US250 billion.

The figure includes $US54 billion to buy up all land within 20 kilometers of the plant, $US8 billion for compensation payments to local residents and from $US9 to $US188 billion to scrap the plant's reactors.

He said the government could help meet this bill by directing around $US71 billion over the next decade through freezing research and development projects linked to the nuclear fuel cycle.

Another $US150 billion could come from Tokyo Electric Power Company's reserve fund, and the government's nuclear energy-related budgets.

Tepco has already borrowed $US24 billion from its banks to give it financial breathing room to handle the current phase of the crisis and start meeting some compensation payments. More will have to come from the government which looks like ending up controlling the power company, one way or another.

So in effect the government will be up for the entire bill for the Fukushima stabilisation, clean up and decommissioning, remediation and compensation.

Copyright Australasian Investment Review.
AIR publishes a weekly magazine. Subscriptions are free at www.aireview.com.au

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