Tokyo Won’t Go to War… This Time

When I visited the memorial at Pearl Harbor, I briefly wondered if the Japanese were simply suicidal.

Why start an uncertain battle with a much more powerful opponent?

Japan’s leaders knew the US military was far superior when they attacked Pearl Harbor, Hawaii on December 7, 1941. The attack killed over 2,400 people and brought the US into World War 2.

But Japan’s leaders had a powerful reason to gamble with their nation’s fate…

Access to energy.

For Japan—an island nation totally dependent on imports—access to oil was a matter of life and death. The country needed to secure its energy supply. That made attacking Pearl Harbor a practical proposition.

Turns out, the Japanese thought not attacking Pearl Harbor was suicidal.

Here’s why…

In the early ’40s, Japan had big plans to dominate East Asia. The imperial Japanese military was on the march. And the US was the only country that could stop it.

The US wanted to block Tokyo and protect its geopolitical position in the region. So it moved to restrict Japan’s access to oil, which Japan needed to feed its economy and war machine.

Not surprisingly, the Japanese considered this hostile and aggressive. The US government didn’t expect it to provoke an attack, though.

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The Assistant Secretary of State for Economic Affairs at the time, Dean Acheson, said, “No rational Japanese could believe that an attack on us could result in anything but disaster for his country.”

The Japanese disagreed.

They knew they would run out of vital commodities soon. So they had two choices… let the US slowly strangle their country and ultimately surrender… or take their chances on a risky war against a vastly superior opponent.

In Japan’s samurai culture, surrender was the ultimate disgrace.

Death in battle was better. So they chose option two. It was the only honorable choice.

Japan’s leaders thought the Pearl Harbor attack could knock the US Navy out of the Pacific for at least six months. This would give Japan a sizable window to secure its energy sources without US interference—and to fortify its military positions across the Pacific.

By the time the US could respond, it would face a deeply embedded opponent and decide it was best to leave East Asia to Japan.

That was Tokyo’s plan, at least.

In reality, Japan did successfully capture Singapore from the British. It was an enormous victory. Winston Churchill called it the “worst disaster” in British military history.

And, after a string of big wins during their six-month window, the Japanese were entrenched. They appeared unbeatable. Their leaders hoped this would sap US morale so much that Washington would seek a compromise.

But President Roosevelt did not want to compromise.

Many believe he was actually waiting for the perfect pretext to sell a hesitant US public on another world war. Some even claim the US had deciphered Japan’s military code and knew the Pearl Harbor attack was coming.

In any case, the Japanese could not have been more wrong. Ultimately, their decision to strike Pearl Harbor culminated in the atomic bombings of Hiroshima and Nagasaki, total defeat, and unconditional surrender. Even today, the US still maintains military bases in Japan.

Today, Japan is in the midst of another energy security crisis.

Right now, it depends on imports for over 90% of its energy needs. Tokyo won’t go to war over it this time. But this crisis could lead to enormous profits in the world’s most hated resource market.

Earlier this year I traveled over 25,000 miles to Japan—and Kazakhstan—to find out how to profit from this historic opportunity.

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The World’s Most Hated Commodity

On March 11, 2011, one of the largest earthquakes in history hit off the coast of Japan. The earthquake, and the tsunami that followed, killed thousands of people and caused over $200 billion in damage.

The tsunami also caused a nuclear meltdown at Japan’s Fukushima power plant, which released radioactivity into the air. It was the worst (and only) nuclear disaster since Chernobyl. Afterward, Japan took all 54 of its nuclear reactors offline.

Japan suddenly needed a major new source of energy.

The country has a law dating back to the 1970s that requires it to stockpile at least five years’ worth of energy supplies. Uranium, which fuels nuclear power plants, is the only feasible way for Japan to do that. It’s simply not practical for Japan to stockpile enough coal, oil, liquefied natural gas (LNG), etc.

For now, Japan is making an emergency exception to its five-year law because of Fukushima. But this puts it in a very vulnerable geopolitical position, especially since tensions with China, its historical rival, are increasing.

The Japanese know that relying on the kindness of foreigners for their energy security is foolhardy. This situation can’t continue indefinitely.

Eventually, Japan will have to bring most of its nuclear power plants back online. However, restarting idled plants is not as simple as flipping a switch. And, with LNG prices near recent lows, they haven’t had an immediate need to do so.

Nonetheless, Japan recently stated that it would like nuclear power to account for as much as 22% of its energy mix by 2030.

Japan is just one factor driving the coming uranium boom.

Even if Japanese demand for uranium doesn’t return soon, the enormous amount of new demand from China’s new nuclear plants will more than offset it.

Before Fukushima, Japan was a major source of demand for uranium. The country had embraced nuclear energy in the 1960s, despite being devastated by nuclear weapons in World War 2.

Not surprisingly, global demand for uranium tanked after Fukushima. A global supply glut followed.

The uranium price crashed from around $85 to under $30. Then it continued sliding to around $18 per pound, far below the cost of production.

That was last November, and it appears to have been the bottom.

That same month, I said uranium had entered a new bull market and recommended a “best of breed” uranium company in Crisis Investing.

Uranium is now on a confirmed uptrend, but it’s still far below the cost of production. It’s still near the moment of maximum pessimism.

No other commodity has more upside and less downside right now.

The uranium market is one of the best crisis investing opportunities I’ve ever seen.

Psychology plays a big part in all this. After Hiroshima, Nagasaki, Chernobyl, Three Mile Island, and of course Fukushima, it’s easy for certain media and politicians to villainize uranium.

Besides that, investors are terrified that uranium prices have fallen over 85% from previous highs. I don’t know of a market where the sentiment is worse.

This is all good news for us.

Nuclear power delivers immense value to its users, there’s no substitute for it, and production is falling while demand rises.

This situation only has two possible outcomes:

1. Uranium prices don’t go up. Miners have no incentive to produce. Nuclear power plants run out of uranium, and the lights go out for billions of people.
2. Uranium prices go up and incentivize enough production to meet the demand.

There are no other options. Which one do you think is more likely?

Right now, the current uranium supply/demand imbalance is setting the stage for the next uranium boom.

Now is the time to get positioned for the same kind of explosive returns we’ve seen in previous uranium bull markets.

Until next time,

Nick Giambruno
Senior Editor, International Man