How Japanese have absorbed the oil price jolts
Of all the industrialized democracies of the world, Japan has adapted to the oil shocks of 1973 and 1979 better than most, says Gaishi Hiraiwa, president of the Tokyo Electric Power Company.
''But have we solved the problems caused by these shocks? No. We have just eased them and made them appear less threatening,'' Mr. Hiraiwa added.
Tokyo Electric is the world's largest privately owned utility. It supplies one-third of the electricity consumed in Japan - more than all of Italy. ''Commonwealth Edison is about half our size,'' says Mr. Hiraiwa, referring to the big Chicago-based utility. In the fiscal year ended March 31, Tokyo Electric sold 136,059 million kilowatt-hours of electricity and had operating revenues of 3.3 trillion yen ($13.2 billion).
But size brings problems. ''Every time the yen goes down by just one yen relative to the dollar, we have to pay 6 billion yen ($24 million) more for oil, '' Hiraiwa said. Tokyo Electric profited while the yen was stronger, but more recently it has been down. This is a cost over which Tokyo Electric has no control, since oil imports are reckoned in dollars.
''It used to be that money and goods moved around the world in correlation with each other. But now money moves from country to country quite independently of the flow of goods. It's just like uncontrolled stock market speculation on an international scale,'' Hiraiwa lamented.
As president of Tokyo Electric, Mr. Hiraiwa is one of Japan's most important business leaders. He strongly supports outgoing Prime Minister Zenko Suzuki's drive for administrative reform - simplifying government structures and reducing the enormous state deficit.
''I told Mr. Fukuda (Takeo Fukuda, prime minister from 1976 to '78), when he issued a vast quantity of government bonds to stimulate the economy during his premiership, that he was only delaying the ultimate day of reckoning. And I was right. Today the Japanese economy is hurting, but we must not delay administrative reform. Without it, everything we do is a palliative, not a fundamental cure.''
As for his own industry, Hiraiwa foresees increased reliance on nuclear power. ''Before the oil shock, fuel constituted only 20 percent of our total costs. Now it eats up 50 percent,'' he said. ''Another 25 percent goes to capital expenditures and the remaining 25 percent to labor. Nuclear-generated electricity costs 60 percent of oil-generated electricity.''
The ultimate cost of nuclear power has not been worked out, ''but I do not expect these costs to be excessive,'' the president said. Tokyo Electric has a nuclear generating capacity of 5,796 megawatts, running at 70 percent of capacity. (The average for Japan last year was 60 percent.) The utility plans to install another 4,400 megawatts of nuclear capacity by 1990. By then, nearly one-third of its power will be nuclear-generated.
The utility will look to hydroelectric power and liquefied natural gas for another third of its electricity, and to oil and coal for the rest, Hiraiwa said. Since power stations require 10 to 15 years from plan to realization, capital investment must continue year after year regardless of business cycles. But this year, Hiraiwa said, the company cut its original investment plan to spend 1.4 trillion yen to 1.24 trillion yen ($4.96 billion).
Decisionmaking at Tokyo Electric rests in the hands of a supreme council composed of the president and six executive vice-presidents. Below this is the managing directors council. Items taken up by the supreme council are passed on to this group before being carried out. Decisions percolating up from below, through the so-called ringi system in which a piece of paper is passed around and each level stamps its seal on it, are mostly routine, Hiraiwa said. Investment plans, raising utility fees, and cost-cutting plans are all matters for the supreme council to decide.
The company has 40,000 employees, with an average age of 36, like many other Japanese companies. ''All of us feel that we sink or swim with the company,'' said Mr. Hiraiwa. The management may change, but the company goes on forever. To make the company better is to make one's own life better, also.''