Probe finds Japan withheld risks of nuke disaster

TOKYO (AP) — The Japanese government withheld information about the full danger of last year's nuclear disaster from its own people and from the United States, putting U.S.-Japan relations at risk in the first days after the accident, according to an independent report released Tuesday.

The report, compiled from interviews with more than 300 people, delivers a scathing view of how leaders played down the risks of the meltdowns at the Fukushima Dai-ichi nuclear plant that followed a massive March 11 earthquake and tsunami.

The report by the private Rebuild Japan Initiative Foundation also paints a picture of confusion during the days immediately after the accident. It says the U.S. government was frustrated by the scattered information provided by Japan and was skeptical whether it was true.

The U.S. advised Americans to leave an area within 50 miles (80 kilometers) of the plant, far bigger than the 12-mile (20-kilometer) Japanese evacuation area, because of concerns that the accident was worse than Japan was reporting.

The misunderstandings were gradually cleared up after a bilateral committee was set up on March 22 and began regular meetings, according to the 400-page report.

The report, compiled by scholars, lawyers and other experts, credits then-Prime Minister Naoto Kan for ordering Tokyo Electric Power Co., the utility running the plant, not to withdraw its staff and to keep fighting to bring it under control.

TEPCO's president at the time, Masataka Shimizu, called Kan on March 15 and said he wanted to abandon the plant and have all 600 TEPCO staff flee, the report said. That would have allowed the situation to spiral out of control, resulting in a much larger release of radiation.

A group of about 50 workers was eventually able to bring the plant under control.

TEPCO, which declined to take part in the investigation, has denied it planned to abandon Fukushima Dai-ichi. The report notes the denial, but says Kan and other officials had the clear understanding that TEPCO had asked to leave.

But the report criticizes Kan for attempting to micromanage the disaster and for not releasing critical information on radiation leaks, thereby creating widespread distrust of the authorities among Japanese.

Kan's office did not immediately respond to requests for comment on the report.

Kan acknowledged in a recent interview with The Associated Press that the release of information was sometimes slow and at times wrong. He blamed a lack of reliable data at the time and denied the government hid such information from the public.

It will take decades to fully decommission Fukushima Dai-ichi. Although one of the damaged reactor buildings has been repaired, others remain in shambles. A group of journalists, including a reporter from The Associated Press, were given a tour of the plant on Tuesday.

Workers have used tape to mend cracks caused by freezing weather in plastic hoses on temporary equipment installed to cool the hobbled reactors.

"I have to acknowledge that they are still rather fragile," plant chief Takeshi Takahashi said of the safety measures.

The area is still contaminated with radiation, complicating the work. It already has involved hundreds of thousands of workers, who have to quit when they reach the maximum allowed radiation exposure of 100 millisieverts a year.

The report includes a document describing a worst-case scenario that Kan and the chief of the Japan Atomic Energy Commission secretly discussed two weeks after the disaster.

That scenario involved the possibility of more nuclear fuel rods burning, causing the release of more radiation and requiring the evacuation of a much wider region, including Tokyo.

The report also concludes that government oversight of nuclear plant safety had been inadequate, ignoring the risk of tsunami and the need for plant design renovations, and instead clinging to a "myth of safety."

"The idea of upgrading a plant was taboo," said Koichi Kitazawa, a scholar who heads the commission that prepared the report. "We were just lucky that Japan was able to avoid the worst-case scenario. But there is no guarantee this kind of luck will prevail next time."

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Associated Press writer Mari Yamaguchi in Okuma, Japan, contributed to this report.

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Follow Yuri Kageyama on Twitter at http://twitter.com/yurikageyama and Mari Yamaguchi at http://twitter.com/mariyamaguchi

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New Central Bank Cash Glut Risks 'Monetary Anarchy'

The scale of money printing in the West has become so massive that the world may fall prey to "monetary anarchy," with traces of bubbles appearing everywhere.

At least that's what some critics see in the latest round of cash pumping by major central banks.

It is also an eerily reminiscent of 2011, when similarly generous monetary easing sparked higher oil prices, slowed the recovery and stoked speculative hot money flows into vulnerable emerging markets.

The European Central Bank alone is expected to lend another half trillion euros or more of super-cheap money to banks on Wednesday, following Japan and Britain which have already injected fresh cash. The Federal Reserve has promised to keep interest rates low until 2014 and act further if needed.

There is a sense of deja-vu in financial markets. Just like the last time a wave of money was pumped into the world financial systems in 2011, crude oil - fuelled also this time by Middle East tensions - has jumped 15 percent this year.

As a result, riskier assets such as equities are already coming off new year highs. Rising emerging market currencies are forcing some central banks there to intervene.

The scale of money creation since the onset of the global credit shock can be seen in the size of central banks' balance sheet expansion.

JP Morgan says G4 central bank balance sheets have more than doubled since 2007 to 24 percent of combined gross domestic product and will reach 26 percent this year.

"We have Monetary Anarchy running riot, where the elastic band between the real economy and the current liquidity-fuelled markets is stretched further and further beyond credulity," Bob Janjuah, head of tactical asset allocation at Nomura, noted.

He said bubbles were visible in all asset classes because central bank balance sheets are at the core.

"If/when the current cycle implodes, central banks which have seen explosive balance sheet growth will add to the problems, rather than being able to act as credible lenders of last resort," he said.

"Real assets are relatively attractive. But I am going to wait for this current central bank bubble to burst before going all in. The end of the bubble will be signposted by either monetary anarchy creating major real economy inflation or by a deflationary credit collapse."

QE3?

Kicking off its second bout of quantitative easing in late 2010, so-called "QE2," the Federal Reserve announced a $600 billion (378.4 billion pound) programme to buy bonds.

The Bank of Japan raised its asset buying and lending scheme to 55 trillion yen in October 2010 and spent a record 8 trillion yen to the currency's ascent, pumping more cash in the process.

Also in October, the Bank of England expanded the size of its asset purchase program to 275 billion pounds. Last month, it raised it again to 325 billion.

While markets got an initial boost from this, the effect was short-lived partly because rising oil prices eventually chilled spending. And aggravated commodity and food-price inflation forced emerging economies to step up monetary tightening.

Taking stocks as a guide, the MSCI all-country world index rose 18 percent between October 2010 and April 2011, only to fall more than 26 percent from there to September.

Since then, it has gained nearly 25 percent, mainly on the ECB's three-year, cheap loan program.

However, the negative consequences of cheap money may not have been all visible, because headlines and prevailing sentiment were dominated by the intensifying euro debt crisis.

"We saw what happened last spring when the Fed printed money - QE2 - amidst a commodities price shock: commodity prices surged further and U.S. consumption faltered as a result," said Stephen Jen, managing partner of SLJ Macro Partners.

"As Greece (debt worries) recede into the background for now, oil enters as the next potential threat to the global economy. The truth may be that oil had already been a threat, but investors were just too pre-occupied with Greece to notice."

Today, a renewed wave of yield-seeking capital inflows is starting to push some emerging economies to act again despite forecasts for an overall slowdown in the world economy.

For example, Colombia raised its key interest rates twice this year to control inflation and slow consumer credit growth. Brazil has been intervening in the currency market to curb a currency rally and keep local manufacturers competitive.

Data from fund tracker EPFR shows global emerging markets equity funds absorbed $18.5 billion this year, compared with outflows of over $13 billion in the same period last year.

Goldman Sachs says the latest round of liquidity injection - which it calls "competitive" monetary easing - may create a problem for emerging markets again.

"With output much closer to potential and inflation at or above policymakers' range of comfort, any stimulative leakage from a bout of monetary easing in the DM world is much less welcome," it said.

"Policymakers are forced to choose between allowing exchange rate appreciations that may be too rapid and accepting domestic overheating, which has its own negative ramifications."

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Geithner: Europe Has Lowered Risks of Catastrophe

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U.S. Treasury Secretary Timothy Geithner said on Sunday that Europe's actions so far to deal with its debt crisis have averted potential financial catastrophe but said it still must put up a sturdier firewall against contagion.

"A durable solution requires both a sustained period of economic reform and a substantial financial firewall to support those reforms," he told a press conference at the conclusion of a Group of 20 finance ministers' and central bankers' meeting.

The weekend meeting focused on Europe and many G20  participants made clear they want to see Europe put up more money for its own defense against a worse crisis before they chip in with more help through institutions like the International Monetary Fund .

"There is broad agreement that the IMF cannot substitute for the absence of a stronger European firewall and the IMF cannot move forward without more clarity on Europe's own plans," Geithner said.

The U.S. Treasury chief repeated that he was not prepared to go to Congress now to seek more resources for the IMF because he didn't feel they were needed at this time.

He declined to say how big a financial firewall he felt Europe needed to put up now but noted that, in order to be credible in markets, it had to be bigger relative to possible claims that might be made on it.

The euro zone countries pledged on the weekend that they would reassess the strength of the bailout fund they now have during March. That could clear the way for other G20 countries to contribute more funds to the IMF.

Geithner sounded an optimistic note that some of the European countries seen as most at risk from a potential debt crisis spreading seemed to be getting onto sounder footing.

"I'm very encouraged by the impact so far of the combined actions of new governments in Italy and Spain doing a very good job of laying out reforms to meet their very formidable economic challenges," Geithner said.

He also praised "a very creative and effective" European Central Bank , which has acted to ensure ample liquidity in Europe. But he conceded in response to questions that progress can take away some urgency from needed reforms.

"You always have to be worried about that but I think Europeans recognize that part of the progress that we've seen — new confidence in markets — is based on the expectation that Europeans have created themselves, that they have more to come."

Copyright 2012 Thomson Reuters. Click for restrictions.

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