Japan's parliament approves Tepco compensation plan

Japan's parliament has approved a plan to help Tokyo Electric Power (Tepco) compensate victims of its tsunami-crippled nuclear plant.

According to the plan, a new fund will be set up to pay damages to victims affected by the nuclear crisis.
Japan's other nuclear power operators will make annual contributions to the fund.
Tepco, which reported a loss of $15bn (£9.2bn) earlier this year, may have to pay more than $100bn in compensation.
"The fact they are going to start to pay out compensation is good news as money will be pumped into the Japanese economy," said Naomi Fink of securities and investment banking firm Jefferies.
Funding source?

Penn Bowers CLSA

The Fukushima Daiichi nuclear crisis saw almost 80,000 people being relocated from areas around the plant.

The crisis has not only hit individuals, but also hurt businesses in the area. As a result, claims are expected to run into billions of dollars.
Analysts say that while the government has approved the plan to pay compensation to the victims, the source of funding will be the key.
"It is going to be a lot more important to find out exactly how the funding is going to be done," said Ms Fink.
Penn Bowers of CLSA in Tokyo added that even though it was not clear how much the nuclear operators will have to contribute, they were likely to increase the cost of electricity to raise the money.
"They will simply pass it on the consumer, it is not going to be a cost that will not be directly borne by the business, but burdened on to the consumers," he said.
Analysts warned that a rise in electricity charges would increase household expenses and have a negative effect on consumer demand.
Government contribution Analysts also added that it was likely the government might take on direct responsibility for some part of the compensation.
They warned that such a scenario would leave the authorities in a tricky situation about how it would fund the payouts.
"You don't really want the compensation plan to give rise to new debt issues, it is already spiralling out of control," said Jefferis' Ms Fink.
Analysts said the government was already spending huge amounts of money to rebuild areas devastated by the earthquake and tsunami.
They warned that the added burden of compensation claims would leave the authorities with few choices.
"There will be a mix, consumption and corporate taxes will go up and they will also have to borrow some money," said CLSA's Mr Bowers.
He added that while a rise in taxes might not come as a shock, "it could still dent consumption."

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