Japan climate policy: A pivotal year

Readers of our reports and blogs will recognise our consistent emphasis on the vital role we believe government policy and regulation play in advancing the climate transition. Japan has recently stood out as a focal point, where we have built on our previous engagements and collaborated with partners to contribute to this dialogue.

Making our position clear 

Last summer, we contributed to the Japan Climate Leaders’ Partnership’s (JCLP)[1] policy statement (and the update in November) on Japan’s Nationally Determined Contribution (NDC) and 7th Strategic Energy Plan, which put forward three proposals:

1. Achieving at least a 75% reduction in greenhouse gas (GHG) emissions by 2035 compared to 2013 levels
2. Increasing renewable energy to account for at least 60% of the electricity mix by 2035
3. Improving the policymaking process by creating more opportunities for participation by demand-side actors

We have also participated in the development and communication of the Asia Investor Group on Climate Change’s (AIGCC) Position Paper on Japan’s Strategic Energy Plan. This paper presented 10 key recommendations for policymakers, ranging from accelerating renewable energy adoption and enhancing the power grid to introducing robust carbon pricing mechanisms and aligning coal policies with global commitments.

Engaging key policymakers and regulators

Together with our fellow JCLP members, we have joined meetings with Ministries of State to advocate for the rapid implementation of transformative climate policies. This includes discussions with Japan’s Chief Cabinet Secretary, Yoshimasa Hayashi, in July and Minister of Environment Keiichiro Asao in November.

Beyond engaging with various members and caucuses of Japan’s National Diet, we have also met with the Bipartisan Group for Realizing Carbon Neutrality, a cross-party initiative within the Diet.

Other discussions in various formats have been with representatives from the Ministry of Economy, Trade and Industry (METI), Ministry of Environment (MOE), Ministry of Foreign Affairs (MOFA), Financial Services Agency (FSA), and the GX Acceleration Agency.

Leveraging influence as a shareholder

We take a dual approach, combining direct policy advocacy and engagement with investee companies. Filing a resolution at a company’s general meeting is an engagement tool we use selectively and with careful consideration to drive further progress on a specific issue[2]. A notable example of this is the shareholder resolution we co-filed at Nippon Steel[3] last year, calling for increased accountability and transparency on climate policy engagement.

Additionally, we have publicised our positions frequently in the media[4], while also taking part in policy roundtables and panel discussions, where we have emphasised our views on the critical role of robust policies aligned with 1.5C to help businesses navigate their transitions.

Our response to the public consultations

In our responses to the public consultation drafts, which recently closed, we reiterated our alignment with JCLP and AIGCC submissions. This includes endorsing JCLP’s latest statement on Japan’s proposed NDC, Strategic Energy Plan, and GX 2040 Vision. The statement welcomes the overall direction of GX2040 Vision draft, which recognises decarbonisation as a key strategy for Japan’s economic growth and global competitiveness. However, in our view it also highlights that the government's proposals for the Global Warming Countermeasures Plan (and NDC) and Strategic Energy Plan lack the speed and ambition needed to align with the 1.5C target and global commitments.

Additionally, we emphasise the importance of transparency and inclusivity in policymaking[5]. As suggested by deliberation panel members, we request that the panel reconvene after the public comment period to allow for further deliberation. 

The steps so far and looking ahead

The policies currently under deliberation will be pivotal in shaping Japan’s path to net zero and its role in meeting global 1.5C goals[6]. However, while there have been some positive developments[7], which we believe we have had a role in shaping, our concerns are still substantial.

We remain committed to supporting the development of robust, 1.5C-aligned policies that we believe are essential for Japan to maintain its competitiveness, strengthen its position in global supply chains, and attract capital as the global economy transitions to net zero.

I would like to express my gratitude to Masaaki Yamamori of IGES for his valuable insights and input to this blog piece.

 
[1] We are active members of the JCLP, a coalition of 252 businesses across various sectors advocating for the early realisation of a decarbonised society.
[2] In appropriate circumstances, we believe shareholder resolutions can also help raise awareness about an issue and potentially influence public policy and broader action. 
[3] For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.
[4] Our views have been featured in publications such as the Nikkei and Japan Times, among others.
[5] For example, research by think tanks such as Climate Integrate and InfluenceMap argue that these principles have not necessarily been upheld in recent discussions.
[6] Expert groups, including the Lancet Countdown and Climate Dialogue Japan, have issued joint statements calling on the Japanese government to adopt a more ambitious NDC.
[7] For example in October 2024, the ruling Liberal Democratic Party (LDP) and Komeito (the LDP’s junior coalition partner) explicitly committed to the 1.5°C target in their coalition agreement. Past statements had only mentioned the ”2050 carbon neutral” target. Groups within the Diet, such as the LDP’s caucus for the promotion of renewable energy expansion and Komeito's Global Warming Prevention Headquarters, have echoed this commitment by advocating for more ambitious NDC and renewables targets. As a JCLP member, we have had the opportunity to engage with key stakeholders and contribute insights to these developments.