A model for Europe? Japan is the first country in the world to issue ‘climate transition bonds’ to transform its economy
A 10-year bond worth 800 billion yen (4.95 billion euros) was issued by Japan’s government last week, while another five-year bond will seek investors at the end of February. And that’s just the beginning. A total of 20 trillion yen will be sought to be raised by the Japanese from private investors in international markets in order to finance major infrastructure projects for the economy’s “climate transition”.
Thus, the Asian country becomes the first country in the world to resort to “climate transition bonds” (which should be distinguished from the “green bonds” usually associated with the construction of a specific project). In this way, the Japanese government hopes that investments in the technologies of the future will not drain the state budget. Japan already has the highest ratio of public debt to Gross National Product (GDP) among developed industrialized countries.
Batteries and microchips are preferred
The main priority of the Japanese will be the design and development of new batteries and semiconductors. Beyond that, the “climate transition bonds” are also expected to finance the construction of low-cost wind turbines, the design of new recycling facilities, as well as the development of an innovative aircraft powered by alternative fuels.
“Japan may lack natural resources and be vulnerable to energy crises, but it stands out for its technological prowess,” points out Toshio Morita, president of the Japan Securities Dealers Association (JSDA). He considers that “the ecological transformation and the transition from the fossil fuel economy to an economy based on clean energy sources” is a key step for the modernization of industrial policy and the strengthening of competitiveness at the corporate and national level.
The “climate transition bonds” are considered a central policy tool for the government of Fumio Kishida, as by 2030 Japan aims to cut greenhouse gas emissions by at least half – compared to 2013 -. The next goal for the year 2050 foresees zero pollutant emissions! It is estimated that to implement all this, the country will have to invest more than 150 trillion yen in the next ten years.
Lack of response or excessive expectations?
Investor reactions were mixed. Dai-Ichi Life Insurance Company announced that it wholeheartedly supports the issuance of the bonds, as it “encourages the transition of Japanese society to a path of development that is not based on fossil fuels.” On the other hand, a representative of Nikko Asset Management Co points out to DW that he would not like to comment on the issuance of the bonds, as “it is a new financial instrument and our analysts would like to examine it carefully before answering any questions.” .
In general, however, it is estimated that the market response immediately after the issuance of the bonds was slightly lower than expected. But “pre-issue expectations were probably too high,” Keisuke Tsuruta, an analyst at Mitsubishi UFJ Morgan Stanley Securities, told Reuters.
Japan’s quest to meet ambitious climate goals is off to a rocky start, as the economy is in a period of stabilization, the population is shrinking, the nuclear industry has been hit hard by the 2011 Fukushima disaster and the country is forced to import energy. to cover 90% of her needs.
Standard or green-washing?
“The capacity of the government budget has been exceeded,” Martin Schulz, an analyst at the Fujitsu Global Market Intelligence Unit, told DW, pointing out that “these bonds are designed to finance the development of renewable energy sources and the necessary infrastructure on the one hand, but on the other hand, to ensure a fiscal balance for government operations”. He even claims that “it is not easy to understand exactly which part of the revenue will be used for which project and that it remains somewhat unclear what is assessed as ‘green’ and ‘ecological’, as a result of which some criticize the new bonds and blame those responsible for ‘green-washing'”.
However, the Climate Bonds Initiative (CBI), a non-profit organization with ecological action and headquarters in London, praises the Japanese initiative and even speaks of “best practice, at the global level”. According to the head of the CBI, Sean Kidney, “issuing climate transition bonds shows how governments or other stakeholders can raise the necessary funds for ecological transformation. It is a milestone decision”.
Edited by: Yiannis Papadimitriou
Source: Skai
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