First CCS zone; Integrating data centers & power plants; Floating offshore wind expands into EEZ; Kawasaki pivots its hydrogen ambition; and more
Japan Energy Currents
Hey Power Japan readers,
Japan’s careful approach to the mercurial US president. That’s rightfully what has taken up much of the oxygen among Japan watchers in the last few weeks.
But there have also been significant but less headline-grabbing developments in Japan’s domestic energy and decarbonization fronts, as well as in its energy diplomacy in Southeast Asia.
This week, we cover Japan’s first CCS exploration zone, an expanded offshore wind policy, efforts to integrate data centers and power generation, Kawasaki’s pivot on its hydrogen ambition, SMFG’s exit from the global climate banking alliance, and Japan’s strengthened energy ties with Malaysia and Vietnam.
Every week, Japan Energy Currents will highlight recent news and analyses that give us a better understanding of the current moment in Japan’s energy landscape and its role in the global energy transition.
Some articles will be in Japanese and some will be paywalled. But I’ll aim to summarize each article with enough detail so you won’t miss out.
This week, I bring you seven stories that caught my attention.
1. Government approves first CCS exploration zone off Tomakomai (Denki Shimbun | in Japanese)
METI has designated a 96 km² area off Tomakomai, Hokkaido, as the country's first official carbon capture and storage (CCS) site. The government is now accepting applications for exploratory drilling permits until May 21, aiming to begin drilling within the year.
This move is key for Japan's CCS push, as Tomakomai has already hosted large-scale CCS trials. The area’s strong local support helped it secure priority designation. METI is also evaluating three other candidate sites in Tohoku, the Tokyo Bay area, and western Kyushu.
The government is targeting annual CO₂ storage capacity of 6–12 million tons by 2030. Expect further CCS site approvals and policy incentives as Japan races to make CCS viable while tackling cost challenges.
2. Linking power plants with data centers in new plan (Nikkei | in Japanese)
The Japanese government will launch a public-private council to integrate data centers (DCs) with power infrastructure. PM Ishiba announced the plan on February 20, directing ministries to finalize details by June.
This initiative aims to decentralize Japan’s DCs, which are mostly in the Kanto and Kansai regions, by encouraging development near existing or planned power facilities. The plan is part of the GX2040 Vision and includes financial support through the GX Transition Bonds.
With measures like this, the government hopes DC projects near transmission lines and renewable energy sources will boost local economies and IT sector growth—possibly shaping Japan’s own “Silicon Valley.”
3. Government reintroduces law to expand offshore wind to EEZ (Nikkei | in Japanese)
The Cabinet approved a bill on March 7 to expand offshore wind development from territorial waters to the Exclusive Economic Zone (EEZ). This move aims to tap Japan’s vast surrounding seas for floating wind farms in deeper waters.
The bill, originally submitted in 2024 but stalled due to a snap election, now gets a second chance. If passed in the Diet, it will enable long-term operational rights for developers and require local consultations before final approval.
The government aims to set 2040 floating offshore wind targets by summer, with new subsidies to boost floating wind technology and domestic manufacturers.
4. Kawasaki HI’s hydrogen dream: One step back for two steps forward (Nikkei GX | in Japanese)
Kawasaki Heavy Industries President Yasuhiko Hashimoto said in an interview that the company is doubling down on building a global hydrogen supply chain despite mounting challenges. Kawasaki had envisioned a large-scale demonstration project sourcing hydrogen from Australia, but soaring costs and uncertain procurement forced a strategic retreat. Instead, Kawasaki will complete the project domestically, reducing its hydrogen carrier’s tank capacity to one-quarter of the original plan.
Hashimoto acknowledges that hydrogen adoption worldwide is progressing slower than anticipated. But he’s steadfast, emphasizing that Kawasaki must continue developing infrastructure for production, transportation, and storage to be ready when demand surges. The Trump administration’s pro-fossil fuel stance could slow momentum further, but Hashimoto sees transition solutions — like hydrogen-natural gas co-firing — as key to gradual market expansion.
Kawasaki is also diversifying its hydrogen sourcing beyond Australia, prioritizing energy security and low-carbon intensity rather than color classifications like “green” and “blue.”
5. SMFG exits global climate banking alliance amid US legal risk (Nikkei Asia)
Sumitomo Mitsui Financial Group (SMFG) will withdraw from the Net-Zero Banking Alliance (NZBA), citing legal risks in the US under Trump. It’s the first Japanese bank to leave, following exits by major US and Canadian banks.
With Republican lawmakers in the US calling decarbonization efforts a “climate cartel,” Japanese megabanks MUFG and Mizuho are also considering pulling out to avoid US regulatory trouble. Meanwhile, European banks remain committed.
Despite the exit, SMFG vows to keep financing decarbonization projects and engaging with client companies to cut emissions to net zero by 2050. NZBA, for its part too, says its focus on financing a net-zero transition is unchanged.
6. Japan & Malaysia to strengthen strategic and energy ties and co-host AZEC summit (Bernama)
Japan and Malaysia will strengthen cooperation in security, trade, and decarbonization, reaffirming ties during a diplomatic reception on February 26. PM Ishiba’s visit earlier this year underscored joint military drills and investment growth.
Both nations will expand collaboration on CCUS, hydrogen, and ammonia fuel projects. As Malaysia chairs ASEAN in 2025, it will co-host the Asia Zero Emission Community (AZEC) summit with Japan to push regional decarbonization.
7. Japan commits $20b in Vietnam’s clean energy push (NHK World)
Japan has agreed to invest up to $20 billion in 14 low-carbon energy projects in Vietnam, including wind power. The deal was struck during a meeting in Hanoi, where the Japan Bank for International Cooperation and private firms will play leading roles in the funding.
Vietnam struggles with frequent power shortages, especially in the north, raising concerns about foreign investment. This partnership is aimed at stabilizing Vietnam’s power grid while advancing its decarbonization goals. Japanese officials emphasized their commitment to supporting businesses from both countries in leveraging these opportunities.
With Vietnam aiming for carbon neutrality by 2050, balancing emissions cuts with energy expansion remains a challenge. Japan, a key AZEC partner, is likely to expand its influence in Vietnam’s clean energy sector while securing opportunities for Japanese firms in the region.
That’s it for this week. If you have any comments or questions on these stories, let me know in the comments section or the subscriber chat.
