The first fruits of a promised $550 billion investment agreement between the US and Japan are already tainted with pollution.
A unit of SoftBank Group Corp. will invest $33 billion in a natural gas power station in Ohio that would be the world’s biggest non-renewable power station. Another $2.1 billion will be spent on a crude oil export terminal. The two projects are the main elements in the first tranche of a deal intended to reduce tariffs on Japanese imports from 25% to 15% in return for investments in the US.
That carbon-heavy outcome might come as no surprise for Washington, where the administration of President Donald Trump has been ordering the Pentagon to buy coal-fired power and turning lumps of fuel into kawaii mascots. But surely Japan — the land that invented the lithium-ion battery and hybrid car — knows better?
Not really. In truth, Japan has been quietly doing for years what Trump is so loud about now — fighting a rearguard action against the energy transition to protect the status of incumbent businesses. Its involvement in the latest swath of Trump projects is less a plot twist than a reversion to type.
Japan’s export-finance agency, the Japan Bank for International Cooperation, or JBIC, is the “dirtiest foreign financier” in Southeast Asia, according to a study last year by the Center for Energy, Ecology, and Development, a Philippines-based clean power think-tank. More than a third of Southeast Asia’s coal power finance between 2016 and 2024 came from Japanese banks, and more than a fifth of gas.
This activity has continued in spite of Japan signing on to international agreements, such as the 2022 Group of Seven communique promising to end such state support. JBIC alone has provided $3.9 billion for such projects since its 2022 commitment, according to Friends of the Earth Japan.
Government backing for dirty energy overseas is best understood as an extension of the magical thinking that passes for an energy transition policy at home. Japan is resting many of its hopes for decarbonization not on closing its fossil power plants, but on scattering biomass and ammonia into furnaces still fueled 80% by conventional lumps of coal.
That reduces emissions only marginally and raises costs by about 50%, so by most measures it’s a non-starter. If government money can be used to prop up an export market for the technology, however, there’s a slim chance Japan’s industrial companies can sell it, while its utilities avoid having to write down obsolete assets.
A common justification for Japan’s foot-dragging is that clinging to fossil fuels is necessary to resist clean energy supply chains dominated by China.
That’s not right, though. Sharp Corp. was at one time the biggest producer of solar panels on the planet, and Panasonic Holdings Corp. and Kyocera Corp. were major manufacturers too. All have largely exited the business now, squeezed as much by an atrophying domestic market as by competition from hungrier Chinese rivals. Just four gigawatts of solar was installed in 2024, the lowest figure since 2012.
It’s similar with wind, which barely operates in Japan thanks to objections from farmers, fishing vessels and landowners. Mitsubishi Heavy Industries Ltd. was once a big player, but it has been left behind by European, US and Chinese rivals who build turbines 10 times bigger. In a business where competition from Chinese exports is still largely absent, its affiliate Mitsubishi Corp. last year quit three offshore wind projects anyway.
The best explanation for what’s happening is not so very different to the state of energy politics in Washington these days: Japan’s oligarchic utility sector has captured its own regulators, alongside JBIC and the powerful Ministry for Economy, Trade and Industry, to prop up its existing business and exclude cleaner competitors.
The US can at least make the argument that it’s rich in fossil fuels. It exports about 9% more energy than it consumes, on net. Japan, however, is one of the most energy-import-dependent economies on the planet, with only 13% produced domestically.
That’s an existential risk that its fossil fuel addiction makes worse. Within the past few months alone, Prime Minister Sanae Takaichi has found herself in a bruising diplomatic battle with Beijing over how Japan would respond to an attack on Taiwan. At the same time, the Chinese navy has been practicing how it would blockade Taiwan’s ports and interdict shipping in the western Pacific in just such a crisis.
Were Japan to find itself cut off from the sources of its imported energy in the event of such a conflict, its inventories of the LNG and coal that provide two-thirds of its electricity would run out in around a month. Crude would last for six months, thanks to stockpiles introduced after the 1973 oil embargo plunged the nation into just such a crisis of panic buying and recession. Nuclear fuel would deplete within two years. The solar panels and wind farms that Japan is currently spurning, however, would keep going well into the 2050s. That looks like energy security, if only Tokyo would recognize it.
Previous generations of Japanese strategists understood the risks of energy insecurity. By aligning with an isolationist US to bolster its quixotic campaign against a world transitioning to clean energy, today’s leaders risk compounding those dangers — for Japan, and for the planet.
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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist covering climate change and energy. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.
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