Analysis: A reporter hears echoes of the past in Japan’s net zero strategy
Reporter's Notebook
I covered Japan’s economic collapse during the 1990s as a reporter for The Wall Street Journal. For years, as the stock and real estate markets spiraled downward, I listened to Finance Ministry officials tell me all was well.
Banks would not fail, they assured me. Japan Inc. would not falter.
The ministry, a critical piece of Japan’s powerful bureaucracy, saw itself as protector of the industry it oversaw. But the bureaucrats overestimated themselves. Eventually banks failed. Japan Inc. was shaken to its core.
I was as surprised as these elite bureaucrats, Japan’s best and brightest.
Fast forward to this year. I’ve spent two months reporting in Japan, now with some valuable hindsight. Listening to bureaucrats from the Ministry of Economy, Trade and Industry (METI), another legendary branch of Japan’s bureaucracy, describe the country’s decarbonization plans, I’m reminded of the same industry-nurturing mindset I heard 30 years ago.
This time, I’m more skeptical whether a set of powerful bureaucrats can impose their vision, in this case for a global market offering competitively priced clean hydrogen.
METI officials — who work in a warren of offices in Tokyo’s government district, a single subway stop from the headquarters of the industrial giants they oversee — see protecting and strengthening Japan’s biggest manufacturers, globe-trotting trading companies and energy giants with names that include Mitsubishi, Sumitomo, Toyota and JERA, as job number one.
That mentality is shaping a national plan to reduce emissions that depends heavily on continuing to utilize the country’s coal- and gas-fired power plants. METI’s bet is that hydrogen can eventually replace coal and gas in those plants.
“These companies have invested a lot of money on these plants, and they want to continue to make good use of them,” one person who works closely with the ministry told me.
Much has changed in Japan since its financial implosion in the 1990s. The country’s once-vaunted “lifetime employment” system — which bred complacency and caution — has frayed to the vanishing point. While the country’s population has aged dramatically, its smaller youth population has learned to embrace more flexible careers.
After more than two-decades of nasty deflation and interest rates that were often below zero, prices have started to rise and the central bank has hiked interest rates. Tokyo, the sprawling capital and the world’s largest metropolitan area, is bustling with new construction. The ancient capital Kyoto is all but overrun by the booming tourist influx, to the point where narrow side streets in the heart of the Geisha district (known as Gion) have been blocked to the public.
Yet the country’s bureaucracy still seems caught in the past. Japan has an opportunity to revive its once-cutting edge technology industry as artificial intelligence (AI) becomes the focus of corporate and national security strategies. AI will require loads of energy-hungry computer chips and data processing.
Decarbonizing the country’s energy, manufacturing and industrial sectors will be key to seizing that opportunity, though.
It’s not that Japan has ignored renewable energy; the country built solar power rapidly over the past decade and wind power is now expanding, especially offshore. The country is also slowly moving to re-embrace nuclear as a clean energy necessity. But the country remains heavily dependent on imported coal and gas.
Whether such AI infrastructure can be fueled cost effectively by low- or no-carbon hydrogen in Japan is a high-stakes, and very much open question. So far, METI and corporate Japan appear determined to bet on it.