Japan’s government is struggling to pass its bail-out of Tokyo Electric Power Company, owner of the doomed Fukushima nuclear plant. But any success would be pyrrhic: a bail-out is another step down the road of forbearance that made Japan’s nuclear industry so dysfunctional in the first place.
It is hard to know what compensation Tepco will owe to those affected by its reactor meltdowns. One estimate, Y4,000bn-5,000bn, does not seem overblown. If correct, it could bankrupt the company, leaving it unable to pay creditors or accident victims their due. Even if the final cost is less, its uncertainty has been enough to put Tepco’s solvency under a cloud: Standard & Poor’s has downgraded Tepco bonds to junk.
Insolvency is what the government is trying to prevent. The draft law sets up a compensation scheme funded by power companies but guaranteed by the state. This commits the government to ensuring bondholders will never contribute to compensation costs through haircuts.