Japan's Results Have Uranium Bulls Ready to Charge

The results from Japan's general election Sunday may be a bellwether event for nuclear power. In a landslide win, Japan's Liberal Democratic Party (LDP) claimed 294 out of the 480 seats in the lower house of the Diet Sunday, defeating anti-nuclear opponents with a platform focused on economic issues and foreign policy. The Energy Report reached out to leading North American analysts for their take on Japan's changing of the guard and its effect on uranium stocks.

Energy played an important role in this election, and as the National Journal reports, LDP Leader Shinzo Abe has criticized Democratic Party of Japan Leader Yoshihiko Noda's goals to eliminate nuclear power from Japan's energy mix as both "unrealistic" and "irresponsible."

Federation of Electric Power Companies of Japan (FEPC) Chairman Makoto Yagi echoed this stance in his Dec. 17 statement, which declared the election a "breakthrough event in regenerating the nation" and called for a diverse energy portfolio that would allow Japan to "attain the three Es of energy security, environmental conservation and economy."

Nuclear Restart Timing Remains Uncertain

Abe's LDP plans to decide on a general nuclear reactor restart within three years, with a longer-term goal to determine the best overall energy mix for the country in the next ten years. As UPI reports, the LDP is expected to "approve the restarts one at a time, when the Nuclear Regulation Authority certifies them to be safe." So far, just two of Japan's 50 nuclear reactors have come back on-line following the Fukushima nuclear power plant disaster. Critics emphasize that the LDP will have to tread carefully on the still-controversial issue and contend with Japan's regulatory and bureaucratic bodies in accomplishing a wider restart.

But the markets themselves were very quick to respond. World Nuclear News reported a 33% jump in Tokyo Electric Power Co. (9501:OSE; TKECF:OTCPK) shares and an 18% boost in share prices for Kansai Electric Power Co. (KEP:NYSE; 9503:OSE). Australian uranium producers Paladin Energy Ltd. (PDN:TSX; PDN:ASX) and Energy Resources of Australia Ltd. (ERA:ASX) rose 8.4% and 5%, respectively.

Experts Approve

Although national polls have shown that 80% of Japanese favored a nuclear phaseout, the country's election results told a different story and many commentators are expressing support of the LDP's economy-focused agenda. Kazuhisa Kawakami, a political science professor at Meiji Gakuin University, argued that "we need to prioritize the economy, especially because we are an island nation," he told the Associated Press. "We're not like Germany. We can't just get energy from other countries in a pinch."

Across the Pacific, some North America-based analysts are decidedly bullish on a bright future for uranium producers.

Rob Chang of Cantor Fitzgerald Canada commented, "We view the Japanese election results as a catalyst for the uranium market because it is the strongest indication to date that Japan will return to meaningful nuclear electricity use. With the Russia-US highly enriched uranium agreement drawing to a close at the end of 2013 and removing about 24 million pounds (Mlb) of uranium from the market, Cantor Research forecasts a continuous uranium supply deficit for many years." [See chart.]

Source: Cantor Fitzgerald Research

Dundee Securities Analyst David Talbot agrees, commenting that "the LDP win may be a turning point for the nuclear sector and the catalyst many investors have waited for. Although we believe the uranium price may be the only catalyst some investors will consider, we expect that this news could accelerate the likelihood that at least part of the Japanese nuclear fleet gets back on-line, perhaps even earlier than mid-2013."

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