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August 2020

Infection rates have been rising in Japan, and new coronavirus cases are reaching daily records. While other countries have been quick to either reimpose lockdowns or stricter border controls, the Japanese government has not yet reinstated the state of emergency. This has opened the government’s strategy to criticism — officials had previously said a state of emergency could be reimposed in a worst-case scenario, but they now want to avoid strict long-term measures. The government is now placing greater emphasis on the number of serious cases, rather than the total number of infections.

Edano Yukio, leader of the opposition CDPJ, called on the government to explain its new thinking. The opposition has also called for an extraordinary Diet session this fall, which would require the consent of a quarter of either house of parliament. It is unclear whether Prime Minister Abe Shinzo, who wants to avoid facing off against the opposition over controversial issues, will reconvene the legislature. But if the government’s COVID-19 strategy backfires and cases continue to surge, failure to call another session of parliament to deal with emergency measures would also be politically damaging for the Abe administration.

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The opposition also has a clear political interest at stake — with a snap election in fall looking less likely, it needs to find new avenues for oversight and debate, lest it be kept on the sidelines until next January. 

Since 2007, only in 2015 did the government not call for an extraordinary Diet session. With the critical state of the pandemic and the economy, as well as torrential rains and landslides in Kyushu, it would be odd for the government not to summon the legislature back into session for additional measures.

Far from pandemic politics, the government is continuing its reforms, aiming to modernize energy and technology in Japan, topics which we cover in this month’s edition of Policy Radar.

Energy:

Energy Policy

METI to exclude foreign companies from operating offshore wind projects

The Ministry of Economy, Trade and Industry has decided to exclude foreign companies from operating offshore wind farms to protect information about its coastline. The government worries that data about Japan’s topography, geology and ocean currents could be leaked to other countries and used for military purposes. Limiting operation to domestic companies makes it easier for the government to minimize the risk of exposure. Domestic companies will need government consent to use foreign equipment or vessels for electricity production or research purposes, with the National Security Secretariat and the National Police Agency examining security risks and taking preventive measures. Under the new guidelines, once an operator is designated through a public application process, it will gain a license with a right to operate for 30 years in the designated location. 

Langley Insight: The main target of the exclusion is Chinese companies, and European companies with proven track records will continue to be present in the Japanese market. The guidelines could permit foreign companies to take part in offshore wind operations by establishing Japanese corporations or through investment in special-purpose companies. Companies whose main headquarters or principal offices are in Japan will not be subject to the government’s restrictions. 

Government wants to increase offshore wind capacity to 1 million kilowatts by 2030

After a joint council meeting on wind power, both the Ministry of Land, Infrastructure, Transport and Tourism and METI will work to increase offshore wind capacity for the next decade from April 2021. While the country currently only has 4 offshore wind farms, the government wants to approve the construction of three to four offshore wind sites per year to produce 1 million kilowatts per year by 2030. The selection process for one of the designated wind farms has already begun, and another three will start this autumn. The joint council will compile a report on the ministries’ vision for offshore energy by the end of the year. METI has also announced that it is ready to draft a comprehensive plan on renewable energy that will include a key role for offshore wind. 

Langley Insight: The government aims to promote private-sector investment in renewables while phasing out coal-fired power plants. Once an operator for a wind farm is selected, it takes five to eight years until commercial operations begin. The government’s renewable energy target is to reach 22% to 24% of all electricity generated by fiscal 2030, meaning that renewables share will grow considerably (in 2018 renewables produced 17% of all electricity).

Japan to abandon financing of overseas coal-fired power plants

The government will abandon most support and financial measures for the construction of overseas coal-fired power plants. Until now, Tokyo, through the Japan Bank of International Cooperation, has been a strong proponent of financing the overseas infrastructure projects of Japanese companies. However, exceptions will be made by the government for plants operated by an integrated gasification combined cycle, which emit 15% less of carbon dioxide compared to normal plants, and plants that combine coal and biomass. The government will also grant exceptions should the coal-fired power stations have a plan to integrate renewable energy into the mix. The government is also interested in financing carbon capture, utilization and sequestration technologies. 

Langley Insight: After Japan came under intense criticism at the COP25 United Nations Conference, the government shifted its coal-intensive plan to reduce emissions levels overseas while securing the use of Japanese technology for developing countries. Environment Minister Koizumi also revealed that standards were being changed, with the government now considering closing about 100 out of the 140 coal-fired power plants in the country. Minister Koizumi has been adept at using foreign criticism of Japan’s reliance on coal to push METI and ANRE into promoting renewables.

METI panels to discuss rules augmenting power grid capacity for renewables

A panel of experts within METI has started discussions on how to be less reliant on inefficient and polluting energy generation, and promoting renewable energy generation from fiscal 2030. The members of the panel will mostly research ending preferential treatment for electricity suppliers, abandoning old coal-fired power plants earlier than planned and rules on the use of power grids so as to promote renewables. During the panel’s first session, the members listed issues that should be given further consideration alongside concrete regulatory proposals to scrap coal-fired power stations. They also highlighted the need to secure a stable electricity supply amid delays in restarting nuclear power stations. The panel plans to compile a series of proposals to the ministry by the end of this year, which will likely be incorporated in the government’s revised basic energy plan. If not delayed, the revised basic energy plan will be released in mid-2021. 

Technology:

Technology Policy Radar

New Cabinet guidelines prioritize digitalization

As part of the government-wide push toward digitalization, the Cabinet Office has approved guidelines encouraging policies to transition to a more digital society. In addition to setting lofty goals with regard to digitalization, the guidelines contain specific proposals like connecting the My Number system with driving licenses and other widely-used forms of identification. Doing so would theoretically expedite certain administrative and bureaucratic processes, making it easier for people to access government resources and systems online. The government also intends to establish specific quotas for teleworking and remote working (70% of companies’ staff to telework), in an attempt to increase economic productivity and promote digitalization within the private sector, which lags considerably behind the standard for developed economies. 

Langley Insight: Implementation efforts of the government’s digitalization initiatives like “Society 5.0” have gained a sense of urgency as the coronavirus pandemic continues. Conditions have increased demand for digital and remote media, communication technology and information-sharing. This is another in a long list of indicators that Japan is, ostensibly, making progress toward mass-digitalization and enhanced cybersecurity. It remains to be seen if the government will be able to propagate and meaningfully enforce the measures suggested in the guidelines.

Cybersecurity protections to be implemented in U.K.-Japan trade deal

As negotiations of the upcoming U.K.-Japan trade deal enter their final stage, the U.K. and Japan have agreed to a number of cybersecurity provisions aimed at ensuring the free flow of data and protecting intellectual property. The two governments have reportedly agreed not to mandate data localization measures like requiring companies to set up domestic servers. Both countries have also agreed not to force companies to allow the government to access private data through an encryption backdoor or by providing algorithms and other relevant code. These provisions are part of a larger, ongoing effort to construct a global framework for the protection of intellectual property. As such, they closely mirror enhanced cybersecurity measures introduced in the U.S.-Japan trade agreement as well as those in the CPTPP.

Group of ruling party lawmakers recommend restricting use of Chinese apps and software

A group of LDP lawmakers, led by party heavyweight Amari Akira, plans to call for the Cabinet to restrict the use of apps and software developed by Chinese companies. Citing security concerns, the group wants to prevent leaks of personal data to the Chinese government. In one of the group’s meetings, Amari said that Japan needs to be more careful and aware of how information is collected and used. The group will submit a set of recommendations to the Cabinet.

Cryptocurrency:

Bank of Japan moves toward testing a digital yen

The Bank of Japan (BOJ) is ramping up efforts to determine the feasibility of a central bank digital currency (CBDC) in what some say is a response to growing concerns about China’s development of a digital yuan. Japan’s digital currency project has become a key priority of the BOJ, according to Director-General Kimura Takeshi of the BOJ’s Payment and Settlement Systems Department, which is largely responsible for the digital currency initiative. The digital yen recently made its first appearance in the government’s annual policy plan, and a specialized taskforce has been set up within the central bank to expand on research conducted last year on CBDCs. The government will continue to investigate the merits as well the practical considerations of implementing a digital currency.

Langley Insight: The adoption of a CBDC may prove to be critical in Japan’s fight against recent economic woes. Domestic issues like prohibitively expensive interbank transfer fees and the economic fallout of the coronavirus pandemic, as well as national security concerns over China’s potential introduction of a digital yuan, have been key in driving the BOJ’s recent efforts. However, the BOJ has also acknowledged that Japan’s high rate of physical currency circulation remains a substantial obstacle to the implementation of a digital currency. 

As the outbreak of the COVID-19 pandemic continues to bring unprecedented impact around the world, public and private sectors rush to adapt to a rapidly-changing global environment. While there is uncertainty for what lies ahead, new opportunities emerge for business and government partnerships. Every day brings new insights, opportunities, and technology that affect Japanese politics, business, and society.

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