Overview and role of finance market for expanding GX investment

Abstract

Japanese government has implemented a new green transformation（GX）policy in 2023 to expand investment in GX sector. Government is targeting to invest 150 trillion yen into GX sector for the next decade. In order to induce GX investment, finance market pressure as well as government policy is critical. Therefore, it is necessary to understand the rules and movements in the finance market.

In terms of environment surrounding financing facilities, environmental, social, and governance（ESG）investment is expanding globally, as well as target settings toward net-zero financed emission in some financing facilities are observed, partly in Japanese facilities. These environments promote entities to invest more in green sectors. Although, backlash against ESG investment is starting to happen, especially in the USA, this trend needs to be paid attention, whether this resists the macro ESG trend.

The finance policy trend in Japan is seeking to create investment chances in GX sector, especially for the transition technologies. Japanese government has created a new financing method called “Transition Finance”, to establish investment chance for appropriate technologies to reach carbon neutrality. The government will issue the new bond, GX Economy Transition Bond, utilizing this finance method to stimulate the usage. However, there are obstacles for further implementation of this new method, especially designing appropriate incentives for users of this method, bond issuer and the creditor.