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Restoring export capability by mending infrastructure is among the less formidable challenges facing Japan. The estimated $300 billion dollar bill for rebuilding Sendai and surrounding areas will place a serious strain on the nation's heavily indebted public finances. Japan's net debt levels are at 120 per cent of GDP, according to IMF estimates.
While borrowing costs are among the lowest in the world and 95 per cent of government bonds are held domestically, ratings agencies have been critical of the government's lax approach to managing its debt-load. Japan was recently downgraded a notch to AA- by Standard and Poor.
Add to the fray the fact that Japanese spending on infrastructure has been among the least successful triggers for stimulating domestic growth.
Infra spend
Reports indicate that between 1991 and 2008, around $6.3 trillion was spent on construction-related public investment which did little to pull Japan out of the growth stupor it experienced following the popped real-estate bubble in the late-1980's. The country has been criticised for spending too much on infrastructure which was sparsely used and did little to stimulate domestic growth.
With growth in demand for steel products remaining largely stagnant, Japanese producers have turned to markets such as India.
Nippon has forged a partnership with Tata Steel for a cold-rolling plant. Sumitomo Industries has a tie-up with Bhushan Steel for know-how and may pick up a stake in the latter's Bengal plant. Kobe is in talks with SAIL for a steel plant utilising propriety technology. The company also has a tie-up with Essar Steel for producing auto-grade steel.
The second largest producer JFE has a 15 per cent stake in JSW Steel and a tech-transfer agreement.
These tie-ups are crucial to improving the quality of steel produced by Indian steel companies and also explore innovative ways to drive down raw material costs with the use of novel steel-making techniques. The Japanese disaster has not affected any of the above tie-ups.
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