Winter is coming, and so is the turtleneck: usually snug, often flattering, currently on sale at Uniqlo for ¥2,990 ($21.50) and, as of last week, a localised Japanese metric of global misery.
The garment’s unexpected new promoter-in-chief is Yuriko Koike, the Tokyo governor who led the world’s biggest metropolis through the pandemic and must now prepare it for at least three frigid and costly months of life in an energy crisis.
The authorities had already warned the Japanese capital in early November to turn off unnecessary lighting (which it hasn’t done), wrap up warm (which it hasn’t yet needed to) and turn down the heating. Wear throat-warming turtlenecks, Koike subsequently recommended with a camera-friendly flourish, to reduce energy use while keeping things “fun and fashionable”. Turtlenecks, of course, being far safer and easier to talk about than the thornier matter of restarting the nation’s nuclear power plants.
Ostensibly, Koike’s advice is sensible, if mildly patronising stuff at an precarious time. Ageing Japan, with its often very poorly insulated and usually electricity-heated homes, is overwhelmingly dependent on ever more expensive energy imports. At the FT’s commodities summit in Singapore last week, there were few who saw the crisis lifting any time soon. The possibility of China adjusting its zero-Covid policies in 2023 could cause a surge in demand for key Japanese inputs such as LNG, and the weak yen will not help. Low-income families and Japan’s huge, vulnerable cohort of pensioners will be hit — like those in Europe — with soaring bills.
But Japan’s power generation industry is dysfunctional enough for the risk to be about more than price rises. Capacity constraints are severe. After a close call earlier this year, some energy experts put the likelihood of a Tokyo blackout at about 10 per cent should a protracted cold snap cause a surge in energy demand. Not unreasonably, Japan’s business world is worried.
The question, then, is how far the turtlenecks — for all their cosy thermal qualities — are subtly intended to terrify. Well aware of her constraints as a metropolitan governor, Koike was vague about the consequences of failing to conserve electricity, though the public knows that they are bad. Electricity bill increases, after years without any, are scarily inevitable; blackouts could be straightforwardly deadly.
The public has also known, since the summer, that the central government and a range of industry lobbies crave its support for restarting more of the country’s mostly idled fleet of nuclear reactors. The long attempt to shift Japan back to its pre-2011 reliance on nuclear power, and into a more definitively post-Fukushima era, appeared to have momentum, and much of that came from a public recognition that Russia’s invasion of Ukraine had changed the calculus.
In August, before his approval ratings began to crater, prime minister Fumio Kishida was confident enough to pledge nuclear restarts, tout the massive LNG savings that would be made with every revived reactor and order a study into the construction of next-generation nuclear plants.
The restart plan has always hinged on local governments granting their approval — nods that have not been obviously forthcoming since Kishida’s announcements, but may come more readily if this winter is presented as a choice between heating and blackouts, with only warm clothes offering margin for error.
The Tokyo equity market, meanwhile, appears to have made its call, with three stocks making the point. In a year when the overall Topix index has basically traded flat, shares in the Tokyo Electric Power Company have risen almost 75 per cent. Much of that, say investors, is driven by anticipation that amid rising inflation Tepco will gain approval to pass production costs on to households for the first time in a decade.
A second outlier has been Mitsubishi Heavy Industries, whose share price has risen nearly 92 per cent on expectations that its nuclear business will thrive on reactor restarts and, quite separately, that its defence business is about to benefit hugely from a historic increase in Japan’s military budget. This is a stock, say investors, that is pricing in Kishida’s ability to push forward on two major policies despite his low approval. On nuclear, the assumption is not necessarily that a Tokyo blackout happens, but that the background fear of one is enough to maintain momentum for restarts.
Slightly less spectacular, but still impressive, has been the 23 per cent run-up in shares of Uniqlo’s parent, Fast Retailing. The company is coy about what has happened in the week since Koike’s remarks. The market has already guessed this will be the winter of the turtleneck.