JAPAN Trends and Developments Contributed by: Takahiro Kobayashi, Shigeki Okatani, Yusuke Murakami and Hirohiko Tanaka, Mori Hamada & Matsumoto
Introduction The energy market in Japan is currently at a major turning point. In October 2020, the Japanese government published a policy target to achieve carbon neutrality by 2050, and in April 2021, released an even more ambitious target to cut down on greenhouse gas (GHG) emissions by 46% by FY 2030, compared with 2013. Against this backdrop, one of the most impor- tant policy issues is how to further grow renew- able energy into one of the main power sources, and how to integrate it into the wider electricity market in Japan. On 18 February 2025, the Japanese government approved the Seventh Basic Energy Plan, outlin- ing measures to achieve a stable energy sup- ply and a decarbonised society. In this plan, the government clearly stated its policy to maximise the use of both renewable energy and nuclear power, aiming to increase them to a maximum of 70% of total power sources by FY 2040, thereby altering its nuclear energy policy that has been in place since the Great East Japan Earthquake. Simultaneously, the government also approved the “GX2040 Vision”, indicating its commitment to achieving a stable energy supply, economic growth and decarbonisation in an integrated manner, in alignment with the global warming countermeasures plan. Renewable Energy Legislation Major reform The Japanese government has implemented a major reform to change the fundamental frame- work for the country’s feed-in tariff (FIT) pro- gramme, under which electricity generated by approved developers from renewable energy sources is purchased by offtakers at fixed guar-
anteed rates for a fixed term (ten to 20 years). Under the FIT programme, offtakers pass their extra costs from purchasing renewable sourced electricity to end-users by adding those costs to electricity bills. Since the FIT programme was introduced in 2012, the development of renewable power plants (especially photovoltaic (PV) power plants) has boomed and the annual cost for power purchase has exponentially increased to approximately JPY4.8 trillion as of 2025, and is expected to further increase in the coming years. Thus, in an effort to reduce the additional burden on households and businesses, the Ministry of Economy, Trade and Industry (METI) has worked to shift from the FIT to the FIP (feed-in premium) programme with more market risks transferred to developers. In June 2020, the Diet (national legislature) enacted the Act to Partially Amend the Electricity Business Act and Other Acts in Order to Estab- lish a Resilient and Sustainable Electricity Supply System (the “FIT/FIP Reform Act”) to implement the fundamental reform of the existing FIT frame- work. The FIT/FIP Reform Act came into effect on 1 April 2022 and substantially amended the existing Act on Special Measures Concerning Procurement of Electricity from Renewable Ener- gy Sources by Electricity Utilities (the amended, and subsequently re-amended, act is referred to in this article as the “New FIT/FIP Act”). Under the New FIT/FIP Act, the government has moved away from the existing FIT system based on a guaranteed fixed-price tariff for a fixed term (eg, JPY40 per kWh for 20 years in the case of large PV projects approved in the 2012 finan- cial year) to the more market-driven FIP sys- tem where developers will receive a premium (“supply promotion subsidy”) to cover the gap
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