Weekly Japanese Industry and Policy News (Jan. 12-18, 2024)

The EU-Japan Centre is pleased to start a new weekly service by publishing brief summary of the latest information from the Japanese governmental organizations & private companies/organizations. A couple of minutes reading to be informed about what is happening in Japan's policy, economy, EU-Japan relations, and innovation.

*Information is deemed correct at the time of release. 

Obayashi Corporation begins green hydrogen production demonstration project in New Zealand and Fiji
On January 9, Obayashi Corporation announced that it will begin a demonstration project on the production, transportation, and utilization of green hydrogen in both countries in collaboration with New Zealand's Obayashi Group Halcyon Power Limited and Fiji's energy supplier Fiji Gas Pte Limited. This demonstration project will (1) produce green hydrogen using electricity derived from geothermal power generation at a hydrogen production plant owned by Halcyon Power in Taupo, New Zealand, and (2) transport the hydrogen by sea from the Port of Auckland to the Port of Lautoka, Fiji. And. (3) The hydrogen will be used to generate electricity in a hydrogen/diesel mixed combustion generator installed at Fiji Gas's LPG storage facility, which will be used as electricity within the facility.

In NZ, approximately 86% of the grid electricity (as of 2023) is provided by renewable energy, mainly hydropower and geothermal power, and the goal is to increase this ratio to 100% by 2030. On the other hand, Fiji, which is a destination for the use of green hydrogen, has set a goal of increasing the ratio of renewable energy in power generation to 100% by 2036, and as a Pacific island country, it is facing the effects of rising sea levels due to global warming. The country is strongly concerned about this and is actively working to introduce renewable energy.

OBAYASHI CORPORATION website:
https://www.obayashi.co.jp/en/news/detail/news20231222_1_en.html

OECD recommends abolishing retirement age in Japan
On January 11, the Organization for Economic Co-operation and Development (OECD) released the report on its biennial economic review of Japan. It proposed a reform plan to secure workers in Japan, where the population is decreasing. It called for encouraging the employment of older people and women by abolishing the retirement age and reviewing the tax system, which causes people to refrain from working. The number of employed people in Japan will rapidly decline in the future. The OECD estimates that in 2023 there will be around 66 million people, including foreigners. If the birthrate continues at the current level of 1.3, it will be halved to 32 million people in 2100.

The OECD estimates that if reforms such as raising the level of employment for the elderly, women, and foreigners are implemented, 41 million people will be able to work in 2100 even if the birthrate is 1.3. If the birthrate can be improved to the government's target of 1.8, it will be possible to maintain the birthrate at over 52 million. Specific measures for the elderly include abolishing the retirement age, ensuring equal pay for equal work, and raising the age at which people can begin receiving pensions. Of the 38 OECD countries, only Japan and South Korea allow companies to retire at age 60. The United States and some parts of Europe do not recognize retirement age as age discrimination.

OECD website:
https://www.oecd.org/newsroom/japan-needs-to-rebuild-fiscal-space-address-population-ageing-and-reinvigorate-productivity-growth.htm

Japanese passport allows to travel to 194 countries and regions without visa
Japan has returned to the top of the “Passport Index,'' which measures the number of countries and regions to which people can travel without a visa. The announcement was made by British consulting firm Henley & Partners on January 10. When it was last announced in July 2023, it had fallen to third place. Henley & Partners publishes the Passport Index twice each year, which is based on data from the International Air Transport Association (IATA). Japan now ranks first with 194, along with Singapore, Germany, France, Italy, and Spain. It is possible to enter 194 of the world's 227 countries and regions without a visa. South Korea, Finland and Sweden followed with 193.

Last time, in July 2023, Singapore was the sole leader, and Japan was in third place along with South Korea and others. The index began being published in 2006. The global average has almost doubled from 58 in 2006 to 111. Overall, people are able to travel more freely than before. On the other hand, Afghanistan was at the bottom with only 28 points, and the gap between first and last place was 166, the largest ever.

Henly & Partners website:
https://www.henleyglobal.com/passport-index/ranking

Mitsui & Co. begins methanol production in the U.S. using factory CO2 emissions
Mitsui & Co. announced on January 10 that it has begun manufacturing methanol using industrially derived CO2 as raw material at its joint venture Fairway Methanol's methanol plant in Texas, USA. The company will purchase CO2 emitted from surrounding plants as raw material, effectively utilizing up to 180,000 tons of CO2 per year and increasing methanol production by 130,000 tons per year. This will bring the plant's annual methanol production capacity to 1.63 million tons.

Mitsui & Co. is procuring renewable natural gas via biogas generated from municipal waste in the United States, and produces bio methanol using a mass balance method at Fairway Methanol. Fairway Methanol is a joint venture established in 2013 with Mitsui & Co. and Celanese Corporation, a major U.S. chemical products company. Production of methanol began in 2015 with an annual production capacity of 1.3 million tons. This project utilizes Celanese's existing infrastructure for producing and Mitsui & Co. is selling it in the United States.

Mitsui Website:
https://www.mitsui.com/jp/en/topics/2024/1248163_14380.html

Itochu launches environmentally friendly flooring materials made in France in Japan
On January 11, ITOCHU Corporation announced that it will sell and recycle Desso, an environmentally friendly flooring material manufactured by European building materials manufacturer Tarkett S.A. (France), in the Japanese market, through Lilycolor, which handles the interior and interior wholesale business. Tarkett is a global building materials manufacturer with a history of over 140 years and sales in over 100 countries. The company is actively working on the development of environmentally friendly products, and has a collaborative relationship with ITOCHU Corporation for sales to Japan.

The flooring material “Desso'' that it has just started selling is an environmentally friendly product that is recyclable, as the base material and surface fibers of the flooring material can be separated and recycled. Lilycolor sells and installs “Desso'' imported by ITOCHU Corporation for expansion in the Japanese market. The aim is to create a flooring circulation system in which used Desso is collected by Lilicara and returned to the Tarkett factory for recycling.

Itochu website:
https://www.itochu.co.jp/en/news/press/2024/240111.html

Chinese business confidence in 2024 is likely to worsen at 39%, survey by the Japanese Chamber of Commerce in China
On January 15, the Japan Chamber of Commerce in China which is made up of Japanese companies investing in China, announced the results of a survey of its member companies on the economy and business environment. Regarding the economic forecast for 2024, 39% of companies answered that the economic situation would be "deteriorated" or "slightly worse" compared to the previous year, which exceeded the 37% that said "stable" and the 25% that said "improved" or "slightly improved." By industry, there were many negative views in machinery such as automobiles.

The reason behind the cautious investment stance is the delay in economic recovery. Regarding business conditions compared to the previous quarter for the October-December period of 2023, 37% said they were “deteriorating'' or “slightly worse,'' which exceeded the 20% who said ``improved'' or ``slightly improved.'' Although the Japan Chamber of Commerce in China says there has been a "slight improvement" compared to the previous survey, the overall trend remains severe. On the other hand, 26% of respondents said that the Chinese market was "the most important market," and 25% said that it was "one of the three most important markets."

Regarding future requests to China, 110 requests were made for visa exemption when visiting China. The number of Japanese visitors to Beijing in 2023 was only about 30% of the number in 2019. The survey was conducted from November to December 2023, and received valid responses from 1,713 of the approximately 8,000 Japanese companies operating in China.

Japanese Chamber of Commerce website (in Japanese):
https://www.cjcci.org/detail/578/631/4564.html

Mitsui & Co. opens factory in Brazil to mass produce biofuel for ships
On January 16, Mitsui & Co. announced that it has partnered with Suzano, the world's leading pulp company in Brazil, to secure plant-based raw materials and set up a factory in the country in 2026 to produce bio methanol, which is considered the favorite next-generation fuel for ships. The company will start with an annual production capacity of around 20,000 tons and will gradually increase its production capacity to a maximum of 100,000 tons. The investment amount is expected to be JP￥10 billion to 15 billion. The raw material is the waste liquid produced when pulp is made from wood.

While bio methanol can reduce CO2 emissions by more than 60% compared to heavy oil, the problem is that it is up to four times more expensive. The 100,000 tons per year that Mitsui & Co. is planning is enough for a large container ship to make 12 round trips between Europe and Asia, and will be the world's first biofuel supply system for ships.The International Maritime Organization (IMO) has set a goal of reducing CO2 emissions from ships to virtually zero by around 2050. Europe has begun a system from this year to purchase emissions allowances based on the amount of greenhouse gases emitted by ships departing from and arriving within the region. There is an urgent need to decarbonize shipping, and demand for products such as bio methanol is expected to increase to 93 million tons per year worldwide in 2040.

Mitsui website:
https://www.mitsui.com/jp/en/topics/2024/1248263_14380.html

Inbound visitor spending in 2023 was a record high of over JP¥ 5 trillion, with a total of 25.06 million people
The National Tourism Agency announced on January 17 that the travel spending of visitors to Japan in 2023 was a record high of JP￥5,292.3 billion. The Japan National Tourism Organization (JNTO) also announced on the same day that the number of visitors to Japan in 2023 was 25.06 million, a recovery to 80% of the pre-COVID-19, 2019 figure. By purpose of consumption, accommodation expenses account for the largest amount, and there is a growing tendency to place more emphasis on experiences than shopping.

Consumption exceeded the government's target of JP￥5 trillion for the year for the first time. This was supported by the weaker JP￥and the increase in the number of overnight stays. By purpose, accommodation expenses were the most common at JP￥1,828.9 billion, followed by shopping expenses at JP￥1,395.4 billion. In terms of composition, accommodation expenses increased from 29.4% in 2019 to 34.6% in 2023, and shopping expenses decreased from 34.7% to 26.4%. Rising average room rates (ADR) for hotel companies also pushed up inbound spending.

Japan Tourism Agency website (in Japanese):
https://www.mlit.go.jp/kankocho/content/001718105.pdf

Japan National Tourism Organization website (in Japanese):
https://www.jnto.go.jp/statistics/data/20240117_monthly.pdf

Emissions reduction falls short of government target of 46%
On January 16, the Ministry of Economy, Trade and Industry (METI) announced greenhouse gas emission reduction targets for 372 domestic companies in the GX (Green Transformation) League, which is comprised of companies working on decarbonization. Combining the target values of each company, emissions in 2030 will be 40% lower than in 2013, falling short of the government's target of 46% reduction. Achieving this goal will require reforming the production processes of material industries that produce large amounts of emissions. The GX League is a framework in which companies voluntarily participate, and currently 568 companies have joined. Of these, targets for 372 companies with complete data have been listed.

Companies in the electronics industry and other industries that have set high goals stand out. On the other hand, many companies in the materials industry, which have large emissions, fall short of the national standards. This is because technology to reduce emissions during the production process has not been established. The combined emissions target for companies with complete data for fiscal 2030 is 480 million tons, which is only a 40% decrease compared to fiscal 2013. The corporate data released by the METI accounts for 53% of total domestic emissions. On the other hand, less than 50% is not covered. The METI will encourage a wide range of companies to participate in the GX League by making participation in the GX League a requirement for receiving government support through GX bonds. Furthermore, given that the difficulty of decarbonization differs depending on the industry, the government plans to set guidelines for emissions reductions by industry from FY2026.

GX league website (in Japanese):
https://dashboard.gx-league.go.jp/e-learning/

ORIX supplies renewable electricity to Amazon at a fixed price in Europe
Orix announced on January 17 that it will build wind and solar power plants in Europe and supply the generated electricity to Amazon.com at a fixed price for a long period of time. The investment amount is expected to be approximately JP￥20 billion. Through Elawan Energy, a Spanish renewable energy company that became a wholly owned subsidiary in February 2023, the company will construct two wind power generation sites and four solar power generation sites in Spain. The total power generation capacity is 160,000 kilowatts. The power will be supplied to Amazon through a "corporate PPA" system, in which consumers and power generation companies make direct contracts to purchase clean electricity.

Elawan Energy’s installed renewable energy capacity is 1.8 million kilowatts, and approximately 10% of the electricity it generates is sold through corporate PPAs. In Europe, wholesale electricity prices have soared due to rising natural gas prices. The wholesale electricity market is highly volatile and has high risks. Fixed prices have traditionally been seen as expensive, but they are increasingly being used by companies looking to reduce long-term risk factors. ORIX has set a group goal of expanding its renewable energy capacity to 10 million kilowatts by 2030, and is also aiming to supply electricity to the Amazon in Japan and India.

ORIX website:
https://www.orix.co.jp/grp/en/newsrelease/240117_ORIXE.html