Japan plans to allocate US$1.34 billion in subsidies to support companies that rely entirely on decarbonized electricity, aiming to boost demand for renewable energy while anchoring new industrial investment in regional areas. The subsidy program will run for five years, starting in fiscal 2026, and will support companies that both use fully decarbonized power and contribute economically to the regions where that electricity is generated. Eligible firms will be able to receive subsidies covering up to half of their capital expenditure, according to Juntaro Shimizu, Director, Green Transformation (GX) policy group at the Ministry of Economy, Trade, and Industry (METI).
“The scheme will provide funds over five years starting in fiscal 2026,” Shimizu said, adding that support could cover up to half of their capital expenditure. Data center operators will also qualify if they meet the same criteria, reflecting government concern over the growing energy footprint of digital infrastructure.
The government plans to begin soliciting applications from eligible businesses in fiscal 2026, which starts April 1, giving companies visibility to incorporate the subsidies into medium-term investment plans.
The initiative is part of Japan’s broader push to align decarbonization with industrial competitiveness. Japan remains the world’s fifth-largest carbon dioxide emitter and continues to rely heavily on imported fossil fuels. In this regard, the country has set a target for renewable energy to account for up to 50% of its electricity mix by fiscal 2040, with nuclear power supplying another 20%. In fiscal 2023, renewables accounted for 22.9% of electricity generation, while nuclear provided 8.5%.
Progress toward the renewable energy goal has slowed. Offshore wind projects, considered critical to meeting long-term targets, have faced rising costs, while large-scale solar projects have been delayed in some regions due to local opposition. The new subsidy framework is designed to address the demand side by making long-term clean power consumption more attractive to corporate users, even as supply-side challenges persist.
The measures fall under Japan’s “GX 2040 Vision,” a national strategy approved by the Cabinet earlier this year that integrates climate policy with industrial development. As part of the framework, the government plans to establish a “GX Strategy Region” system aimed at creating new industrial clusters in areas with access to decarbonized power.
Under the system, local governments and companies will jointly draw up regional development plans. The national government will then select regions and provide support through subsidies and regulatory reforms. Applications from local governments are expected to open later this fiscal year, Shimizu said.
AloJapan.com