Japan Urged to Ditch Fossil Fuel Support to Maximise Clean-Tech Exports
Japan must pivot from fossil fuel subsidies to clean energy to protect industrial competitiveness.
1Export Growth Potential
Japan's clean energy technology exports could more than double by 2035 as Asian markets accelerate electrification. Currently the world's fifth-largest exporter of clean-tech goods, Japan reached $44 billion in exports during 2024. However, analysts suggest this figure could be significantly higher if the government implements policies to fully embrace the clean energy transition.
2Fossil Fuel Decline
Exports of combustion engine vehicles and fossil fuel-powered equipment are projected to drop from $161 billion in 2024 to approximately $70 billion by 2035. This decline is driven by faster-than-expected electric vehicle adoption across Asia. Japan risks losing its traditional dominance in regional car markets if it fails to pivot away from hybrids.
3Strategic Policy Misalignment
Japan has spent roughly $86 billion on fuel and energy-bill subsidies since 2022 to keep prices low. Critics argue this public funding props up outdated systems like coal and gas, rather than supporting the domestic market for batteries and electric motors. This spending diverts resources away from necessary industrial innovation and infrastructure.
4Competitive Landscape Shifts
Japanese carmakers have seen their global market share fall from 31% to 26% since 2019. In Southeast Asian markets like Thailand and Indonesia, Chinese brands accounted for over 85% of electric vehicle sales in 2025. Japan's reliance on hybrid vehicles has allowed competitors to capture the rapidly growing fully electric vehicle segment.
5Industrial Strengths Unlocked
Japan possesses a strong engineering base and some of the world's lowest borrowing costs, positioning it to be a leader in the electric age. With solar and wind potential capable of generating 13 times its annual electricity demand, the country has the natural resources to support a massive shift toward renewable-powered manufacturing and exports.
6Current Electrification Status
Electricity currently supplies 32% of Japan's final energy use, making it one of the most electrified nations globally. Despite this, the rate of electrification has barely increased over the last decade. A new international pledge aims to raise this share to 35% by 2035, requiring Japan to significantly accelerate its current energy transition.
7Proposed Policy Reforms
Experts recommend that Japan set a firm end date for petrol car sales and coal power generation. Shifting taxes from electricity to fossil fuels and redirecting public funding toward electric technologies could bolster domestic demand. These changes are viewed as essential for Japanese companies to remain competitive against aggressive international rivals in Asia.
8Economic and Security Impact
Transitioning to clean energy technologies offers Japan a major opportunity to enhance both industrial competitiveness and national security. By reducing dependence on imported fossil fuels, Japan can stabilize its energy supply. Successfully exporting clean-tech solutions to Asia would also strengthen Japan's diplomatic influence and economic standing in a rapidly changing global market.