Japan’s power utilities reported combined losses of about 1.6 trillion yen a year ago, the equivalent of $20 billion at the time. Yesterday, they repeated the performance.
On the face of it, the bad news for the companies looks like a boost for Prime Minister Shinzo Abe and his 2 percent inflation target in Japan as the utilities will probably raise electricity tariffs. Except it’s the wrong kind of inflation.
“I have a hard time seeing the government declining the move for higher tariffs, I don’t think they can,” said Klaus Baader, chief Asia Pacific economist for Societe Generale SA in Hong Kong. “But this isn’t the kind of inflation we want in Japan to break the deflation mindset. We’d like inflation that is a reflection of higher wages, whereas this is pure cost inflation that decreases purchasing power.”
The shares of Tepco, as Tokyo Electric is known, fell 3 percent to close at 417 yen on the Tokyo Stock Exchange, a 94 percent decline since the day before the March 11 disaster. Kansai Electric rose 3.9 percent. Both companies released earnings after markets closed yesterday.
The results add pressure on atomic utilities to pass on rising fuel costs after the Fukushima disaster prompted the shutdown of all but two of Japan’s 50 nuclear stations. Six have already raised or are planning to increase electricity prices.
Tokyo Electric, which has about 30 million customers in Japan’s biggest metropolitan area, raised household rates by about 8.5 percent in September 2012.
That was to cover purchases of oil, natural gas and coal needed in power plants switched on to replace nuclear reactors. Osaka-based Kansai Electric and Fukuoka-based Kyushu Electric Power Co. won the government’s approval to raise electricity prices last month.