One of the many things to worry about now that Japan is finally doing what we have been waiting for it to do (devaluing the yen and so pushing up the stock market at speed) is the effect the falling currency will have on the price of its energy imports.
With that in mind it is worth reading this report of a talk given by Stefan Larus Stafansson, the ambassador of Iceland to Japan, at the United Nations University Headquarters in Tokyo late last year.
In it he notes that geothermal has become the backbone of the Icelandic economy some 66% of its energy comes from domestic geothermal sources (which must have been useful when the krona collapsed in 2008).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
However, he also notes that Japan has the world's third greatest geothermal potential (something that won't surprise anyone who has ever been on an onsen trip in Japan) and that, were they to use it, the energy produced could replace 25 nuclear reactors.
Yet back in the late 1990s, Japan, under the LDP, made a decision to focus on nuclear power at the expense of all other types. The last geothermal plant in Japan was built in 1999, and all research support from the government was suspended in 2003.
Just as interesting is the fact that nearly all the geothermal turbines used in Iceland are made in Japan the market is controlled by Mitsubishi Heavy Industries, Toshiba and Fuji.
There is talk about new plants, including one in Fukushima itself, but things aren't exactly moving very fast.
Perhaps the fall in the yen they have now orchestrated so brilliantly might focus the minds of the LDP a little more on Japan's long term energy prices and their effect on the current account: last month's trade deficit came in at yet another new record thanks almost entirely to rising energy costs.
PS: Heating prices in Iceland are the lowest in northern Europe, thanks to the use of naturally hot water to heat homes. Iceland also uses its hot water to farm tropical fish.
-
House prices to crash? Your house may still be making you money, but not for much longerOpinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recessionOpinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy nowOpinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to realityOpinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about itOpinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
Value is starting to emerge in the marketsOpinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
-
ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few yearsOpinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
