November 16, 2009

Japan's Plan to Grow their Green Economy

The Japan Business Association of Seattle and Trade Development Alliance of Greater Seattle sponsored an event on November 12, 2009 featuring Mr. Toshiki Takahashi, Director of Japan External Trade Organization's (JETRO) International Economic Research Division. JETRO is a Japanese government-related organization that works to promote mutual trade and investment between Japan and the rest of the world. Mr. Takahashi's presentation, "World Economic Development and the Japanese Economy," focused on the Japanese economy as it relates to the broader global economy. Mr. Takahashi also discussed the investment opportunities that exist in Japan's environmental sector and the country's desire to grow its green economy.

According to a JETRO publication printed in 2007 discussing Japan's environmental sector, "Japan's economic development has so far been supported by a society based on mass production, mass consumption, and mass disposal. Currently, approximately 450 million tons of waste is generated every year, putting waste treatment facilities under unrelenting strain." The publication further explains, "As global environmental problems grow more acute, a concerted effort towards a recycling-based society has begun, and Japan's ecobusiness market is rapidly expanding in both size and range." Japan's Ministry of the Environment predicts the ecobusiness sector will be valued at 47.2 trillion yen (US$530 billion) by 2010.

Moreover, "Ecobusinesses that provide technology, products, or services that contribute to the protection of the environment play a vital role in the creation of a sustainable socioeconomic system with a low environmental impact, and the government will continue to actively promote and foster these businesses in the future." Japanese businesses are "currently developing environment technology under the banner of the '3 R's': Reduce, Reuse and Recycle."

JETRO segments the environmental sector into five key areas conducive for foreign direct investment:

  1. Clean energy: According to the Environment Ministry's "Market Size and Employment in Japan's Environmental Business Sector: Present Condition and Forecast for the Future," the scale of the market for green energy, which includes renewable energy facilities and energy conservation and management, was 890 billion yen (US$10 billion) in 2000, no more than about 3 percent of all environmental business. Due to technological development and reforms, however, the market size is predicted to increase 6.5 times, to 5.812 billion yen (US$65.3 million), by 2010, and grow further, to 9.9 times this size, or 8.798 billion yen (US$98.9 million), by 2020. The clean energy sector includes solar power generation, fuel cells, and energy service company (ESCO) businesses, which provides comprehensive services relating to energy conservation in factories and buildings;
  2. Waste treatment: While the waste treatment and recycling sector market is already large and is expected to grow further, it is supported by small businesses. This industry does not require large-scale existing facilities or huge initial outlays and so small and medium-size businesses, as well as venture companies that are yet to be established, can enter the industry. Studies by the Ministry of the Environment predict the market for waste disposal to grow from 3.614 billion yen (US$40.6 million) in 2000, to 7.736 billion yen (US$86.9 million) in 2010, and still further, to 11.126 billion yen (US$125 million), by 2020;
  3. Recycling: Recycling laws for key items have already been introduced in Japan, beginning with enforcement of the Containers and Packaging Recycling Law in 1997, followed by recycling laws for food, construction material, and furniture, and then, in 2005, the Automobile Recycling Law. With the enforcement of each of these new recycling laws, the trajectory was set for a new recycling sector. A variety of business opportunities have been created in the recycling sector, including development of new technologies, that take advantage of regional government schemes enabled by national government policies, such as "eco-towns" and "designated structural reform districts";
  4. Soil and water remediation: According to the Ministry of the Environment, the size of the soil and water remediation market, including equipment and services provided, was 84.8 billion yen (US$964 million) in 2000. However, it is forecasted that soil and subterranean water pollution controls in Japan will become stricter, and the market will grow to 6.8 times its 2000 size, to 582.8 billion yen (US$6.5 billion), by 2010; and
  5. Air pollution prevention: The number of business opportunities related to air pollution prevention is increasing due to the introduction in 2000 of an ordinance requiring the use of exhaust purifiers in Tokyo, Kanagawa, Saitama and Chiba. In addition, the climate change policies are expected to bring about the full-scale initiation of greenhouse gas emissions trading. Apart from international emissions trading based on the Kyoto Mechanism, domestic trading is also anticipated, allowing every business to fulfill its pollution reduction targets.

(1 JPY=0.0112 USD)

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