Japan

In April 2021, Prime Minister Suga declared to update Japan's National Determined Contribution and set the goal of reducing GHG emissions by 46% from 2013 levels by 2030. In October 2020, the country announced its commitment to achieving net zero GHG emissions by 2050. Corresponding to this commitment, the "Green Growth Strategy", which affects 14 sectors grouped in three large areas including energy, transport/manufacturing (semiconductor and ICT, mobility and battery, agriculture and different types of transportation) and home/office (buildings and next-generation PV, resource circulation and lifestyles), was formulated to support the private sector to transform their businesses to be compatible with a net-zero society.

The plan sets to implement five policy tools to meet this goal, which includes grant funding (i.e. Green innovation Fund), tax incentives for private investment, long-term funds with an interest subsidy to attract global ESG investment, regulatory reform (hydrogen, offshore wind power and mobility/batteries), and international collaboration (i.e joint projects, standardisation, and rule-making). The strategy is led by the Ministry of Energy, Trade and Industry (METI) in collaboration with related ministries and agencies. This plan builds on the Plan for Global Warming Countermeasures headed by the Prime Minister and the rest of the government, which set long-term strategies based on the promotion of innovations leading to GHG reductions.

This Plan for Global Warming Countermeasures also mobilises finances to support corporate efforts and co-innovation with others to promote competitive technologies and products with high environmental performance. The plan can be regarded as the latest detailed national green economy plan, and it can be characterised as a technology- and innovation-oriented plan.

Considering the call for substantial systemic changes to achieve net zero emissions by 2050, it is necessary to extend the scope of the national green economy plan to institutional innovations such as ambitious carbon pricing schemes and higher renewable energy targets.

According to OECD informal consultation procedures are crucial in shaping consensus around final product, and also adopted notice-and-comment requirements for all new regulatory proposals and revisions to existing rules. Although there's no statutory requirement concerning representation of labour unions, workers' representation is important in the drawing up of work rules, which the employer is obliged to do as soon as 10 or more workers are continuously employed. Japan missed the target of increasing the share of women in leadership positions to at least 30% by 2020 (in all fields of society) and Gender Equality Plan still has to set a new target.

Several systems are in place to provide high-quality guidance and support for private sector SDG reporting and contribution to the SDGs. The Financial Service Agency (FSA) established the "Stewardship Code" and the "Corporate Governance Code", which refer to the understanding of the status of investee companies and information disclosure by companies from the perspective of encouraging initiatives related to sustainability, including ESG factors. In addition, the Ministry of the Environment (MOE) has prepared a set of "Environmental Reporting Guidelines" that includes how to deal with sustainable development issues, mainly environmental aspects, in management strategies, reporting procedures and concepts, and materials containing good practices. Regarding TCFD, MOE has also issued the "Practical guide for scenario analysis that incorporates climate-related risks and opportunities for planning management strategies".

The Ministry of Economy, Trade and Industry (METI) has also issued a report titled "Integrated Disclosure and Dialogue Guidance for Value Co-Creation - ESG, Non-Financial Information and Intangible Asset Investment. Moreover, METI has developed guidelines related to individual sectors and issues, including the "Diversity 2.0 Action Guidelines", "CGS Guidelines", "Biomedical Industry Version of the Value Co-Creation Guidance", "Integrated Disclosure Guidance for Industrial Security and Product Safety", "TCFD Guidance", and "DX Promotion Guidelines". Recently, the Ministry of Foreign Affairs (MOFA) adopted the "Japans National Action Plan on Business and Human Rights" which encourages business enterprises to promote introducing human rights due diligence in the context of their business activities.

Japan is involved in wealth accounting beyond GDP metrics, at least for natural capital and environmental services. In 2016, the Economic and Social Research Institute of the Cabinet Office published a report on the application of SEEA-CF, with a draft version of SEEA-Water. Japan also supports development of SEEA-EEF and the Ministry of the Environment (MOE) carried out research in this area. There are no details regarding other wealth accounting sub-components regarding social areas or components.

Japan established its Expert Panel on Sustainable Finance in December 2020, which is due to produce an outcome report in June. The outcome report will outline Japan's most up-to-date thinking on key aspects of sustainable finance policy and indicate areas of focus and work. Key developments and initiatives have been unveiled in the past six months. Most notable are the 'Basic Guidelines on Climate Transition Finance,' meant to provide guidance on transition-labeled financial instruments. The guidelines will be accompanied by an upcoming industry transition roadmap.

The FSA has described the guidelines as those that allow for 'multiple shades of green,' 'accommodation of multiple pathways,' and 'full inter-operation' with other initiatives (including the EU Taxonomy). The pending update of the Corporate Governance Code and Stewardship Code in June will make the guidance stronger and clearer with respect to sustainability-related disclosure. Although the measures are not mandatory in nature, they involve all relevant ministries and are underpinned by the Suga Administration's commitment to net zero GHG emissions.

The Basic Environment Plan indicates that the country will promote greening the tax system and using tax revenue from a special tax measure on Petroleum and Coal for Climate Change Mitigation. Through the Special Account for Energy Measures, the Ministry of the Environment (MOE) supported various mitigation projects. Japan released its Green Bond Guidelines, which were last updated in 2020 with the aim of boosting the issuance of green bonds and loans.

Guidelines are not legally binding but they have been used for private issuances, as Japan still has not issued sovereign green bonds. The country also has a Green Procurement Act, being applied at different administrative levels. It is being enforced following the unveiling of the SDGs, as the number of designated procurement items increased from 101 items in 14 categories in 2001 to 274 in 21 categories in 2017.

In 2019 Japan adopted centralised stress testing, with the government and central bank carrying out a top-down test on five of its largest financial institutions (including the country's three megabanks). Until this point, the central bank had not taken on supervisory responsibilities - leaving individual banks responsible for testing.

The Bank of Japan and the Japanese Financial Services Agency conducted a joint pilot scenario analysis exercise on climate-related risks facing six major financial institutions in 2022, but stated that it was "a learning exercise designed to improve the application of scenario analysis within institutions" rather than a step towards the development and adoption of climate stress testing.

The Government introduced a Carbon Tax (the Global Warming Countermeasure Tax) in 2012 as an additional portion of the Petroleum and Coal Tax, with revenues going towards measures to curb CO2 emissions, although the price remains under USD 3 per tonne CO2. Japan is currently considering a national ETS. In 2017, an advisory committee to the Ministry of the Environment (MOE) formulated a "Long-term Low-Carbon Vision" for the country. The document refers to carbon pricing as essential to decarbonize society. In March 2018, an expert committee on carbon pricing released a study assessing how carbon pricing could help Japan achieve long-term, substantial emission reductions, as well as solve economic and social issues. Discussions are ongoing, as of June 2021.

Japan has developed its Green Growth Strategy as an industrial policy that aims to create a virtuous cycle of economic growth and environmental protection. The Strategy includes five cross-sector policy tools (support measures) and action plans for 14 sectors. Policy tools include grant funding (Green Innovation Fund), tax incentives, guidance policy on finance, regulatory reform (hydrogen, offshore wind power, and mobility/batteries) and international collaboration.

The 14 sectors are grouped as energy, transport/manufacturing, and home/office. The government has a target for new generation vehicles being between 40-70% of new sales by 2030 and is promoting electric and hybrid cars using subsidies and infrastructure support. Electric, hybrid and hydrogen technologies are also to be promoted in maritime and aviation transport. Meanwhile, the Building Energy Efficiency Act requires new residential buildings to meet energy efficiency standards from 2020 onwards and aims to reduce average net primary energy from constructed building and houses to zero by 2030.

As for energy, government aims to push offshore wind power, hydrogen and nuclear power for hydrogen production. In May 2021, the Ministry of Agriculture, Forestry and Fisheries (MAFF) developed "Strategy MeaDRI", a strategy for sustainable food systems, as a green economy strategy for sectors related to food and agriculture. It aims for zero carbon emission from the agriculture, forestry and fisheries sectors and sets a series of quantitative targets by 2050, including a 50% reduction in risk-weighted use of chemical pesticides by dissemination of the Integrated Pest Management and newly-developed alternatives, 30% reduction in chemical fertilizer use, an increase in organic farming to 25% of farmland, 90% and more superior varieties and F1 plus trees in forestry seedling, and 100% of artificial seedling rates in aquaculture of Japanese eel, Pacific Bluefin tuna, etc. In addition, it stipulates several targets by 2030 such as achieving at least 30% enhancement in productivity of food manufacturers and sustainable sourcing for import materials.

There are low interest loans for the expenses to introduce renewable energy power generation and heat utilization facilities through the Japan Finance Corporation, as well as reduction in property tax for SMEs that make certain capital investments on these topics. The "Revitalization Strategy" provides access to finance through crowd-funding schemes for young entrepreneurs (and low-interest loans for people that is less than 40 and have started a business in the last 5 years).

In April 2021, Prime Minister Suga announced a target of reducing GHG emissions by 46% (from 2013 levels) by 2030 and committed to net zero GHG emissions by 2050. The new 2030 target is yet to be communicated as Japan's revised NDC. While Japan has codified in law its commitment to achieve net zero GHG emissions by 2050, it is not sufficient to meet the objectives for emissions reduction set out in the Paris Agreement.

The Green Growth Strategy towards carbon neutrality sets 50-60% renewables in 2050 as reference. The National Determined Contribution target for renewable electricity share is 22.25% for 2030 (solar, wind, geo-thermal, etc.). Theres an Energy Plan to retire the majority of old, inefficient coal plants by 2030 and boost offshore wind power deployment by installing 10GW of capacity by 2030. The decarbonisation of electricity also considers hydrogen, thermal power generation with carbon utilization, recycling and sequestration, and nuclear power. There is a National Hydrogen Strategy to pursue this source as an option. However, even though the government of Japan announced these strategies, there is a lack of a road map and clear target on clean energy.

In its green economy planning, Japan recognises green jobs and inequality issues to a limited extent. Notably, the countrys Green Growth Strategy (2020) recognises green jobs and mentions that actions will be taken to allow for just transitions away from brown sectors; however, no specific actions have been proposed.

Japan has a Drafted General Principles on poverty among children. Relative poverty rate of single-parent households is particularly high among active households with children, and these have the aim to avoid that children are harmed by the environment in which they grow.

However, there is no clear integration of pro-poor policies, including a green growth or a conservation approach. In this sense, green transitions or even sustainability in general in Japan are discussed without any considerations on their implications for vulnerable individuals/groups, which may include low-income individuals, part-time workers, single-parent households, families that have those living with disabilities, etc.

There are some schemes for participatory policymaking in Japan. However, they are not effective in allowing citizens to participate in policymaking in a meaningful way. Firstly, Japanese law specifies an assessment process for larger development projects such as the construction of dams, solar power plants, etc. if they meet certain conditions (e.g. projects that require license, projects receiving subsidies, etc.). However, these do not assess impacts on marginalised people. Secondly, national and local government agencies must set a period of receiving public comments on regulations and decrees, but comments do not usually influence the final decision.

Moreover, both of the above are implemented such that they block people from participating in policymaking in a meaningful way. Specifically, in a) assessments are conducted after decisions have been more or less made, and in b) the processes preceding public comments are not transparent.

The Japanese health care system is characterized by universal coverage. Nursing services for the elderly as personal services are provided by local governments and authorized non-profit organizations, and the costs of services excluding recipient fees are financed by taxes. There is also a Basic Program for persons with disabilities to support their independence and social participation, including transport, legally mandated employment rates and help to find jobs and hold down to them. Despite some measures, there is no clear strategic approach for innovative social protection policies in the context of new green economy.

Japan has a "Basic Plan on Water Cycle" to manage river basins in a way that ensures supply, environmental functions of water and climate-related water risks. It also developed resource management guidelines that require fishers to formulate management plans that include voluntary resource management measures by fishers beyond public regulation. Despite some measures, there is no specific strategy that includes targets to achieve SDGs 14 and 15.

Japan is an active Party to the Convention on Biological Diversity and hosted the 10th meeting of the Conference of the Parties to the Convention in 2010, where a ten-year strategic plan upon which all Parties were invited to model their national plans. Japan produced a national plan for the period 2012-2020, with the stated intention (in its 5th Basic Environment Plan), to "formulate and achieve new global targets (post-2020 global biodiversity framework) after 2020". The latter is in reference to the COVID-delayed successor to the CBDs 2011-2020 Strategic Plan, which is due for adoption later in 2021. Meanwhile, marine and terrestrial biodiversity are discussed throughout the 5th Basic environment Plan, as are the SDGs. Although there are no specific mentions of targets or indicators related to SDG14 or 15, the Basic Plan is already setting things up to do so.

Japan conducted research for developing an accounting system that reflects SEEA-EEA's framework to put value to ecological stocks and ecosystem services flow. The system also covers accounting at the prefecture (subnational) level. It also is working in PANCES, with the aim of predicting and assessing natural capital and ecosystem services by building an integrated model of socioecological systems. It is expected to contribute to review the National Biodiversity strategy and Climate Change Adaptation Plan.

In addition, Japan plays an important role in the Inclusive Wealth Project in which a countrys inclusive wealth is defined as the social value of all its capital assets, including natural capital, human capital and produced capital.

Japans government has been supporting and contributing to research for developing an accounting system following SEE-EEA's framework. It is also involved in other research projects in the field like the PANCE project to predict and assess natural capital and ecosystem services as well as UNEPs Inclusive Wealth Project. Despite these steps, no evidence was found of a Natural Capital advisory committee or similar advice structures for government.

Japan has Carbon tax for oil, gas, and coal imports since 2012. In addition, in 2019, the Forest Environment Tax (FET) and Forest Environment Transfer Tax (FETT) were created based on the idea that all citizens should equally support Japans forests. For FET, an additional 1,000 yen per capita per year will be imposed by the national government as part of the individual residence tax from FY2024. The national government then allocates the revenues from FET to local governments i.e. FETT. The use of FETT is limited to forest management by local governments. FETT is already being implemented using other national revenue since 2019.