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Nuclear Crisis Feeds Regulation Doubts

By NORIHIKO SHIROUZU in Tokyo and ALISON TUDOR in Hong Kong

Japan’s nuclear-power crisis is reviving long-held doubts about the strength of the nation’s nuclear regulatory system and its independence from government efforts to sell nuclear technology abroad.

There aren’t indications that any government regulatory failures contributed to the problems at the Fukushima Daiichi complex in northeastern Japan, where government and industry officials are battling to keep three of the six nuclear reactors from overheating and releasing dangerous levels of radioactivity.

The health of the badly damaged nuclear plant in Japan is deteriorating by the hour. Video courtesy of Reuters

However, the woes there put a spotlight on Japan’s Nuclear and Industrial Safety Agency, which oversees design and regulation of Japan’s nuclear plants.

It also highlights past problems with falsified safety records at the Fukushima Daiichi plant and with its parent company, Tokyo Electric Power Co., or Tepco, though there is no evidence those prior problems are adding to the current problems.

The Japanese nuclear safety agency, known as NISA, is part of Japan’s Ministry of Economy, Trade and Industry. The larger ministry, known as METI, has in recent months revved up a push to help Japanese power companies, including Tepco, win deals to build nuclear reactors abroad.

A METI statement issued by ministry spokesman Tatsuji Narita says Japan maintains a healthy regulatory environment through a redundant, second agency attached to the Cabinet named the National Safety Commission. That agency reviews METI’s nuclear-regulation efforts with a focus on safety.

“Japan maintains the independence of its nuclear regulatory agencies through this redundant ‘double-check’ system,” the statement said.

In August, Masayuki Naoshima, then Japan’s Minister of Economy, Trade and Industry, led a delegation to Vietnam to promote the sale of nuclear power plants to the Southeast Asian country for the second phase of its atomic power project. The delegation included Tepco Chairman Tsunehisa Katsumata, as part of a group of Japanese power companies that banded together to win contracts in the face of rising competition from companies in South Korea and Russia, among other places.

Japan will likely win a contract to build Vietnam’s second nuclear power plant, following a joint statement late last year by Vietnamese Prime Minister Nguyen Tan Dung and Japan’s Prime Minister Naoto Kan saying that “Vietnam confirms that the Vietnamese government chooses Japan as a cooperation partner to build two nuclear reactors.”

Tepco couldn’t be reached to comment.

In the U.S., the previous nuclear-energy regulator, the U.S. Atomic Energy Commission, came under attack in the 1970s, accused by members of Congress of being unwilling to stand up to the commercial nuclear industry because it was supposed to promote the nuclear industry even as it assured public safety.

Confusion and panic levels are rising across Japan following another blast and fire in Fukushima. WSJ’s Mariko Sanchanta and Yumiko Ono separate fact from fiction in the latest nuclear reports.

In 1975, a new independent agency was created, the U.S. Nuclear Regulatory Commission, which was charged with overseeing safety issues. A newly formed Department of Energy was to guide research and grant monetary support to the sector.

The Fukushima Daiichi plant has a black mark on its record from earlier in the last decade, when a scandal involving falsified safety records led to parent company Tepco briefly shutting down its entire nuclear fleet in Japan. In 2002, Tepco admitted to the Nuclear and Industrial Safety Agency that it had falsified the results of safety tests on the containment vessel of the No. 1 reactor, which is now one of three reactors that workers are struggling to keep from overheating. The test took place in 1991-1992.

The scandal was the latest in a string of nuclear safety records cover-ups by Tepco, including the revelation that the company’s doctoring of safety records concerning reactor shrouds, a part of the reactors themselves, in the 1980s through the early 1990s. Five top executives resigned after the company admitted to having falsified safety.

In 2003, Tepco shut down all of its nuclear reactors for inspections, acknowledging the systematic cover-up of inspection data showing cracks in reactors.

Japanese regulators already have some credibility issues after previous episodes in which the strength of the response was called into question.

In Japan in 1999, an uncontrolled nuclear chain reaction at a uranium-reprocessing plant killed two employees and spewed radioactive neutrons over the countryside. Government officials later said safety equipment at the plant was missing and the people involved lacked training, adding that their assessment of the accident’s seriousness was “inadequate.”

In 2007, an earthquake heavily damaged Tepco’s Kashiwazaki-Kariwa plant. The company initially said there was no release of radiation, but admitted later that the quake released radiation and spilled radioactive water into the Sea of Japan.

“The Japanese government is saying that the containment’s OK, but that belies belief when you see the violence of the explosion,” said John Large, a nuclear consultant, referring to the current troubles at the plant. He added, “Understandably, they do not want to panic their population.”

The recent problems have prompted new rounds of warnings from anti-nuclear groups. “A nuclear disaster which the promoters of nuclear power in Japan said wouldn’t happen is in progress,” the Tokyo-based Citizens’ Nuclear Information Center said in a statement on its website. “It is occurring as a result of an earthquake that they said would not happen.”

—Alison Tudor

and Dionne Searcey contributed to this article.

Japan Nuclear Plant’s Troubles Deepen

BY YUKA HAYASHI AND PHRED DVORAK

Japan’s unfolding nuclear-power crisis deepened Monday, with a new explosion and accelerated overheating at one reactor in Fukushima and the start of cooling troubles at another.

The explosion took place Monday morning at the No. 3 reactor of the Fukushima Daiichi nuclear complex, the same place where a failure to cool overheated fuel rods at the No. 1 reactor resulted in a similar blast on Saturday. That explosion also damaged a pump used to bring in sea water for added cooling, the government’s Nuclear and Industrial Safety Agency said at a briefing Monday evening. The agency said the fuel rods …

Former Fannie CEO May Face SEC Action

By NICK TIMIRAOS

Daniel Mudd, the former chief executive of Fannie Mae, said he has received a Wells notice from the Securities and Exchange Commission, the latest clue that federal investigators have expanded their years-long probe into the troubled mortgage finance giant.

Mr. Mudd, now the head of Fortress Investment Group LLC, said in a statement provided to Bloomberg News that he had received the formal notification from the SEC that it plans to pursue civil claims against him. The development was first reported by Bloomberg News.

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Reuters

Former President and CEO of Fannie Mae Daniel Mudd testifies during the Financial Crisis Inquiry Commission hearing on Capitol Hill in Washington, April 9, 2010.

Mr. Mudd took the helm of Fannie in 2004 in the midst of an accounting scandal and oversaw its financial-reporting restatement with the SEC. He was sacked by the government when it took control of the mortgage firm in 2008 and agreed to inject unlimited sums as ballooning loan losses wiped away thin capital reserves. In August 2009, he became CEO of Fortress, the New York-based hedge fund.

A Wells notice indicates that the SEC staff is preparing to recommend civil enforcement actions and gives individuals the opportunity to persuade regulators against such an action.

Mr. Mudd plans to submit a written response, he said in the statement provided to Bloomberg. The disclosures under investigation by the SEC were “accurate and complete,” had been previewed by federal regulators and “have been issued in the same form since the company went into government conservatorship,” the statement said. Mr. Mudd declined to elaborate.

The notification is the latest clue that the SEC is deepening its investigation into Fannie Mae and its sibling, Freddie Mac. Both companies have previously disclosed that federal prosecutors and the SEC were conducting investigations into potential violations of federal securities laws.

Mr. Mudd is the highest-ranking official to have disclosed receiving such scrutiny. Last month, the SEC filed a similar notification to one current Freddie Mac executive and at least one former Freddie Mac executive related to unspecified “disclosure matters.”

Donald J. Bisenius, a 19-year veteran of Freddie who currently serves as the executive vice president in charge of the firm’s single-family credit guarantee business, will leave Freddie on April 1. Anthony “Buddy” Piszel served as Freddie Mac’s chief financial officer until the government takeover in 2008, and he resigned a similar position at CoreLogic Inc. last month.

Write to Nick Timiraos at nick.timiraos@wsj.com

Yen’s Post-Quake Rally May Fade

BY NEIL SHAH

While all eyes are trained on Japan’s effort to overcome its biggest earthquake on record and the radiation threat from a damaged nuclear plant, some investors are raising eyebrows over the yen’s recent strength.

On Friday the Japanese currency appreciated sharply against the dollar after the massive earthquake sparked speculation that companies from the world’s third-biggest economy could start shifting funds back home from the U.S. and elsewhere to help pay to rebuild — something that happened after Japan’s last major earthquake in 1995.

But this knee-jerk response may prove short-lived, several investors and analysts say.

For starters, worries are …

Relief Effort Continues as Nuclear Worries Loom

BY CHESTER DAWSON IN SENDAI, JAPAN,
DAISUKE WAKABAYASHI
IN FUKUSHIMA PREFECTURE AND JURO OSAWA IN TOKYO

A huge relief effort continued Sunday in earthquake-ravaged northern Japan as tens of thousands of Self-Defense Forces searched desperately for survivors while more bodies were recovered and concerns rose about a radiation leak at a nuclear power facility in the country.

More than 200,000 Japanese have been moved to relief shelters and millions of homes remain without power and water after the country’s most powerful quake ever struck on Friday.

The National Police Agency said the death toll from the disaster as of midday Sunday in Japan was 801, with 678 missing. There were various reports of discoveries of more …