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Japan Ends Commercial Coal Production - 2002-01-09

Japan is marking an end of an era in its energy sector, with the country's last coal mine shutting down Wednesday.

Japan's Taiheiyo mine ceased commercial coal production Wednesday afternoon, bringing an end to an industry, credited with fueling the recovery of the devastated country after World War II. All 1,000 miners at the company are to be dismissed at the end of this month, as the Hokkaido mine closes after 82 years of operation.

The company blames the mine's closure on a severe business climate. But analysts say it is also a demonstration of Japan's efforts to reform the power industry. The government had pushed electric utilities to purchase domestic coal, even though it was three times more expensive than imported coal.

According to Lalita Gupta, who tracks the Japanese utilities industry for U.S. investment bank Morgan Stanley, power companies now will free to always use cheaper coal from overseas. "This closure of the coal mine is effectively a kind of a very big change in the national policy, which means that utility companies will not have to buy any more coal and their input price will decline for that amount," Ms. Gupta explains.

But Japanese consumers, who pay some of the world's highest electricity rates, will not likely see cheaper monthly bills. Ms. Gupta says Japan for many years has been getting most of its electricity from nuclear and other power sources. "The percentage of domestic coal to the coal consumption by electric companies is only one or two or a couple of percentage points, so the cost reduction impact is actually not as great," Ms. Gupta said.

The country's trade ministry says Japan's coal production sank from a peak of 56 million tons in 1940, to a mere three million tons in 2000.