Published on and written by Cyril Jarnias
Amid a constantly evolving global dynamic, Japan finds itself at the heart of numerous transformations in the energy sector. Combining technological innovations and environmental challenges, the Land of the Rising Sun is striving to redefine its energy landscape in favor of more sustainable solutions. This quest is deeply influenced by recent developments in energy policies, reflecting a commitment to renewable sources while navigating the complexity of its island economy. With an eye toward the future, this article explores the emerging trends shaping Japan’s approach, balancing innovation opportunities with the unavoidable demand for energy security.
Overview of Japan’s Energy Market Trends
Primary Energy Sources and Energy Mix
Japan’s primary energy supply mainly depends on fossil fuels, with oil, natural gas, and coal representing the majority. In 2025, the situation is as follows:
- Oil: approximately 36%
- Natural gas: approximately 23%
- Coal: approximately 25%
- Renewable energy: approximately 25% (primarily solar energy)
Renewable energy is steadily increasing, but Japan’s self-sufficiency rate remains low, at about 17.7%.
Recent Policy Trends and Regulations
The Japanese government has committed to achieving carbon neutrality by 2050 and is promoting a GX (Green Transformation) strategy. This goal aims to reduce greenhouse gas emissions by 46% by fiscal year 2030 compared to fiscal year 2013 levels and to increase the share of renewable energy to 36-38%. Policies considering the development of new technologies and local revitalization are also being implemented.
Initiatives for Renewable Energy Integration
In the renewable energy sector, investments continue to grow in solar and wind power. Notable points include:
- Solar: growth with an installed capacity of over 75 GW.
- Offshore wind: expected to become a major source by 2050.
However, challenges remain, such as adjusting supply-demand balance due to dependence on weather conditions.
Impact of Natural Disasters
Risks from natural disasters like earthquakes and typhoons pose problems such as nuclear facility shutdowns or damage to distribution networks. Consequently, there is increasing demand for strengthening disaster prevention infrastructure and introducing decentralized power generation systems.
Technological Innovation and Phasing Out Fossil Fuels
Energy-saving technologies and next-generation renewable technologies (hydrogen use, artificial photosynthesis, batteries) are being advanced. In particular, innovative approaches include:
- Perovskite solar cells
- Hydrogen iron technology
- Direct Air Capture (DAC) systems
International Partnerships and Foreign Investment
Expanding investments from abroad is also encouraged, with examples of Western companies entering the Japanese market. Additionally, Japan is active in establishing cooperative relationships with Asian countries to promote domestic industry.
Thus, Japan aims to transition to a low-carbon society while tackling various challenges.
Good to Know:
In Japan, the energy mix is dominated by liquefied natural gas (LNG), accounting for nearly 40%, followed by coal and oil, while nuclear energy, although declining post-Fukushima, is slowly regaining its strategic position. Recently, the government has adopted ambitious policies to achieve carbon neutrality by 2050, encouraging the integration of renewables, which now exceed 20% of the mix, with an emphasis on solar, wind, and geothermal. Japanese technological advancements, including innovations in batteries and energy management systems, support the acceleration toward greater energy efficiency. Furthermore, regular earthquakes strongly influence energy policy, prompting the country to develop resilient infrastructure. Finally, Japan engages in numerous international partnerships, especially in Southeast Asia, to diversify its supply sources and attract foreign investment in green technologies.
The Rise of Renewable Energy in the Archipelago
1. The Scale of Recent Development
In Japan, the share of renewable energy production is increasing, reaching 26% of the total for fiscal year 2023. In particular, solar energy is the main source, representing 11.3% of total annual production. This growth is approximately 2.2 times higher than in 2012, thanks to the introduction of systems like FIT (Feed-in Tariff).
2. Main Adopted Technologies
- Solar energy: It has the largest share among renewables and is widely spread throughout Japan.
- Wind energy: Expectations are growing around offshore wind as well as onshore wind.
- Geothermal energy: It is mainly harnessed in regions rich in thermal resources.
- Biomass and hydropower: They continue to be used as stable supply sources.
3. Government Policies and Initiatives
Based on the “6th Basic Energy Plan,” the Japanese government has set the goal of expanding the renewable energy ratio to 36-38% by 2030. Additionally, support for technological development through the “Green Innovation Fund” and economic incentives via FIT/FIP systems are also being introduced.
4. Economic Impact: Investments and Job Creation
The renewable energy industry creates new job opportunities and contributes to the local economy. For example, strong labor demand is observed in equipment installation, as well as operation and maintenance sectors. This also serves to strengthen collaboration between local communities and businesses.
5. Geographical and Climatic Constraints
Challenges specific to Japan include the risk of facility damage due to frequent earthquakes, regional differences in sunlight and wind conditions, and terrain constraints related to mountainous landscapes. These factors require caution when planning installations.
6. Future Outlook: Link to Carbon Emission Reduction Goals
To achieve carbon neutrality by 2050, Japan plans not only to increase its renewable energy capacity but also to install large-scale storage batteries and develop smart grids. In this context, a strategy to expand the diversified use of natural resources is also being considered.
7. Examples of Innovative Projects
- Next-generation solar panels: new technology enabling efficient installation even in traditionally unused spaces.
- Offshore wind turbine project: as a nation surrounded by sea, Japan is promoting the construction of large-scale offshore wind farms.
Good to Know:
In recent years, Japan has experienced significant expansion in renewable energy, with notable adoption of solar, wind, and geothermal technologies. The government has implemented ambitious policies, such as the 2012 Renewable Energy Law, to stimulate this sector, leading to massive investments and the creation of numerous jobs. Despite challenges related to its geographical and climatic constraints, the country aims for a substantial reduction in carbon emissions by 2050. For example, the Fukushima Prefecture solar project, which uses abandoned farmland, and the Kitakyushu offshore wind power plant illustrate Japanese innovation. These initiatives, although encouraging, require careful management of natural resources to support sustainable long-term expansion.
Fluctuations in Japan’s Electricity Costs
Historical Overview of the Last 10 Years
Electricity costs in Japan have experienced significant variations over this decade. After the Great East Japan Earthquake in 2011, nuclear power plants ceased operation, increasing dependence on thermal power generation. This led to a system easily influenced by fuel costs. Moreover, the increase in natural gas (LNG) and coal prices on the international market, particularly since 2021, has caused these fuel prices to surge, raising electricity rates. The weakening yen has also been a factor amplifying import costs.
On the policy side, since the introduction of the Feed-in Tariff for renewable energy, the burden of renewables has increased, passing on to consumers. Additionally, challenges persisted on the supply side, such as decreased production due to unfavorable weather conditions and the decommissioning of aging thermal facilities.
Current Influencing Factors
- Energy Mix and Dependence on Fossil Fuel Imports: Japan still heavily relies on thermal power generation, with natural gas and coal being the main fuels. However, market factors, such as international instability due to the Russia-Ukraine war and OPEC Plus reduction decisions, have caused these fuel prices to soar. This leads to upward pressure on costs at both wholesale and retail stages in Japan.
- Transition to Renewable Energy: The expansion of renewable energy introduction results in a burden for consumers in the form of surcharges. Furthermore, renewable energy production like solar and wind comes with climate risks, limiting stability. Nevertheless, the policy to achieve the carbon neutrality goal by 2030 is being promoted.
- Government Policy and Regulation: A temporary subsidy has also been introduced as a measure to control electricity rates. However, medium- and long-term solutions, such as improving reactor operation rates and supporting next-generation biomass technologies, are also being considered. On the other hand, under policies promoting free competition, intensified competition among some small operators raises the need to observe ripple effects, such as bankruptcy risk.
Future Trends and Technological Innovation
Areas to watch in the future:
- Prospects for Extending Innovation in Battery Technology and Smart Grid Use: Demonstrating implementation models integrating artificial intelligence optimization algorithms is considered important.
- Preparatory Stage for Realizing a Hydrogen Society: The ability to successfully convert national resources is crucial.
- Proposal for improving consumption efficiency, including establishing a base for providing savings knowledge.
It is essential to strengthen common understanding of requirements for flexible adaptation based on outcome assessments and course corrections according to effort direction.
Good to Know:
Over the past ten years, Japan’s electricity costs have been marked by notable fluctuations, largely due to the Fukushima nuclear disaster in 2011, which led to increased fossil fuel imports and a reevaluation of energy policies. Currently, electricity prices are influenced by an energy mix still heavily dependent on coal and liquefied natural gas imports, although the transition to renewables is a growing priority. Government policies, such as support for green energy and carbon emission regulations, play a significant role in modulating energy costs. In the near future, Japan could stabilize its costs through technological innovations, like smart grids, and energy efficiency strategies aimed at reducing consumption in households and industries. Current fluctuations exert pressure on consumers facing high bills and on industries that must adapt to remain competitive.
Impact of Energy Policies on the Japanese Market
Japan’s energy policies and their impact on the market
Japan’s energy sector has undergone major transformations in recent years, and the 7th Basic Energy Strategy, adopted in February 2025, clearly shows the direction. This strategy is based on the S+3E principle, aiming to strengthen energy security, improve economic efficiency, and adapt to the environment.
Promotion of Renewable Energy
The 7th Basic Energy Strategy positions renewable energy as the main power source. By fiscal year 2040, it is planned to maximize the introduction of renewables to raise the energy self-sufficiency rate to about 30 to 40%. This is expected to lead to the following impacts:
- Expanded opportunities for solar and wind energy developers to enter the market
- Increased investment in renewable energy-related technologies
- Growth in renewable energy procurement by power companies.
Commitment to Carbon Emission Reduction
The Japanese government has set the goal of achieving carbon neutrality by 2050, with a 46% reduction in greenhouse gas emissions by fiscal year 2030, compared to fiscal year 2013. To achieve this goal, the following measures are being implemented:
- Consideration of introducing a carbon pricing system
- Phasing out coal-fired power plants
- Promoting electrification in industrial and transport sectors.
These policies are expected to significantly impact energy-intensive industries and the automotive industry, accelerating investments in low-carbon technologies.
Energy System Reform
The liberalization of electricity, heat, and gas markets is driving energy system reform. This reform leads to the following impacts:
- Increased entry of new players into the market
- Strengthened cross-sector collaboration
- Expanded choice options for consumers.
These changes have the potential to stimulate market competition and accelerate innovation.
Japan’s Challenges and Opportunities in the Global Context
Japan’s energy policy faces the following international challenges:
- High dependence on energy imports (99.7% for oil, 97.7% for LNG, 99.6% for coal)
- Increasing geopolitical risk
- Responding to the global decarbonization trend.
On the other hand, these challenges also create opportunities such as:
- Development and export of clean energy technologies
- International deployment of energy efficiency improvement technologies
- Development of the renewable energy industry in collaboration with local revitalization
Japan’s energy policy aims to maintain and enhance its international competitiveness while balancing these challenges and opportunities. Promoting innovation in the energy sector and establishing leadership in the global market will be important focal points in the future.
Good to Know:
Recent energy reforms in Japan, particularly after the Fukushima disaster, have significantly influenced the market by favoring a transition to renewables and carbon emission reduction. The government has implemented subsidies to encourage solar and wind energy, which has stimulated investments and transformed the practices of producers and distributors seeking to comply with environmental standards. These efforts have not only improved the competitiveness of Japanese companies in the international market, but they have also created opportunities for technological innovation in energy storage systems and smart infrastructure. However, the challenge remains to further diversify the energy mix while maintaining supply stability and security, posing questions in the face of continued dependence on fossil fuel imports.
Disclaimer: The information provided on this website is for informational purposes only and does not constitute financial, legal, or professional advice. We encourage you to consult qualified experts before making any investment, real estate, or expatriation decisions. Although we strive to maintain up-to-date and accurate information, we do not guarantee the completeness, accuracy, or timeliness of the proposed content. As investment and expatriation involve risks, we disclaim any liability for potential losses or damages arising from the use of this site. Your use of this site confirms your acceptance of these terms and your understanding of the associated risks.
Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
