Japan unveils plans to create Asian transition finance coalition

Prime minister Fumio Kishida outlined a series of planned sustainable finance policy measures in a speech at PRI in Person.


The Japanese government will work to improve regional alignment on transition finance in Asia, prime minister Fumio Kishida told the PRI in Person event on Tuesday.

The efforts will be based on Japan’s national green transition strategy, Kishida said. The government plan, which is referred to as GX or “green transformation”, aims to reform industrial and financial policy with the goal of pivoting the Japanese economy towards cleaner sources of energy.

Key elements of the GX push includes the planned issuance of Japan’s inaugural climate transition bonds (or GX bonds), and a “GX League” coalition of more than 600 companies working to make their operations less carbon-intensive.

However, elements of the GX plans have drawn criticism for their reliance on unproven technologies including carbon capture, ammonia and green hydrogen, which critics say will extend Japan’s use of coal and other fossil fuels, and delay policy actions that are needed now.

According to Kishida, Japan will launch an Asia GX consortium by mid-2024 “to encourage specific implementation cases of transition finance that fit and leverage the strengths and attributes of each country”, in conjunction with the GFANZ Japan chapter.

The local offshoot of the GFANZ net-zero coalition was launched in May, following the opening of a regional APAC office in Singapore last year.

The prime minister also outlined a series of planned policy measures on sustainable finance in his speech.

These include the creation of a “dialogue on enhancing sustainability investment products” by market regulator the Financial Services Agency of Japan (FSA).

Kishida also indicated that the Japanese government is working on a regulatory package to facilitate increasing investments “targeting companies that address social challenges while encouraging others to follow suit”.

The package will aim to improve the governance of asset managers and owners, encourage new fund manager entrants, and promote competition within the sector.

The prime minister also confirmed that the government’s planned ¥20 trillion ($130 billion; €127 billion) GX bond issuance would take place before Japan’s fiscal year-end in March 2024. Proceeds will be channelled toward renewables and “new energy sources such as hydrogen, and industrial facilities and equipment in industries such as steel, chemicals, and automobiles”, he said.

Finally, Kishida announced that seven public pension funds, with ¥90 trillion or $600 billion in retirement assets, are to “start preparations” to become PRI signatories. Details of the seven funds were not immediately available.