IEEJ © December 2019. All rights reserved.

23 December 2019
The 434th Forum on Research Work

Economic and Energy Outlook of Japan for FY2020
Leveled off Japan’s economic growth and shift to low carbon

ETO Ryo, H. Okabayashi, N. Aizawa, C. Onda, T. Iwata, Y. Shibata, S. Suehiro, A. Yanagisawa
and K. Ito

Summary of economic and energy outlook [Reference Scenario]
Macro economy | Economy will marginally grow depending on public demand
While foreign demand in FY2020 will turn to contribute positively in line with global economic recovery,
private demand will show signs of slowing down. For three years in a row, public demand is contributing themost to an increase. Industrial production will slightly rise, however, it will not reach the level of FY2017. Thebalance of trade will turn to be positive, thanks to a fall in fossil fuel prices.

Energy supply and demand | Primary energy supply will decrease for the third year
in a row and CO2 will decrease for its seventh year in a row, but both will be reducedby less than 1% for the second year in a row.
Primary energy supply in Japan in FY2019 decreases by 0.3% from the previous year due to an industry
production fall, although growing heating demand after the warmer-than-normal winter in the previous year
will exert upward pressure. In FY2020, primary energy supply will decrease by 0.4% on an ethylene
production cut and energy efficiency improvements. (-0.4%). The trend away from fossil fuels towards
non-fossil fuel will continue but while production from renewables will increase before the deadline of thepenalty set for the FIT, nuclear will increase a much slower pace due to delays in the completion ofcounterterrorism facilities.
In FY2020, however, CO2 emissions will decrease by 0.5% to 1,048 Mt which is lower than 1,050Mt for the firsttime, according to the statistics after FY1990. This corresponds to a reduction of -15.1% from FY2013, whichmeans that two-thirds of the reduction target of energy-related CO2 emissions set for FY2030 will be achieved
in FY2020.

Energy sales | Electricity sales will increase gradually. City gas sales will not reach arecord high despite increased sales to electric utilities. Fuel oil sales will decline foran eighth consecutive year and will consist of just two-thirds of the record highOverall electricity sales in FY2019 increase by 0.1%. Lighting services increase in reaction to a fall amid thewarmer-than-normal winter in the previous year, and power services decrease reflecting a production fall in
the iron and steel production and machinery. In FY2020, electricity sales will increase by 0.4%. Power services
will increase in line with the recovery of production activities concentrating on machinery industry whilelighting services should decrease slightly, on the further penetration of energy-efficient appliances.
Overall total city gas sales in FY2019 are flat. There are decreases for general industries with production falland for commercial and others due to a cooler summer. Sales increase for electric utilities, due to theoperation of new city gas-fired power plants, and for space and water heating requirements in household
due to a return from the previous year’s milder winter. In FY2020, although sales for industries will increase
due to the increase in sales for electric utilities and because of the recovery of production, the overall sales

Economic and Energy Outlook of Japan for FY2020| 1

IEEJ © December 2019. All rights reserved.

(+2.0%) will be less than the record high of FY2017 due to a slowdown in fuel switching to city gas and awarmer winter than when the sales were the highest.
Table 1 | Summary of Reference Scenario
HistoricalPrimary energy supply (Mtoe) 1
Oil2 (GL)Natural gas 2 (Mt of LNG equiv.)
Coal2 (Mt)

EnergyNuclear (TWh)Renewable electricity3 (TWh)FIT generation (TWh)Self-sufficiency ratio
Electricity sales 4 (TWh)City gas sales 5 (Billion m3)
Fuel oil sales (GL)
Energy-related CO 2 emissions (Mt)
(Changes from FY2013)

Prices

Crude oil, import, CIF ($/bbl)
LNG, import, CIF ($/MBtu)
Steam coal, import, CIF ($/t)
Coking coal, import, CIF ($/t)

EconomyReal GDP (JPY2011 trillion)
Industrial production (CY2015=100)
Balance of trade (JPY trillion)
Fossil fuel imports (JPY trillion)
Exchange rate (JPY/$)
Cooling degree days
Heating degree days

Projection

FY2010FY2016FY2017

515.9
232.3
73.3
184.7
288.2
111.2
63.2
20.2%
(926.6)
39.28
196.0
1,137
-7.9%
84
11.3
114
175
493.0
101.2
5.3
18.1
86.1
559
1,079

463.1
205.1
88.1
188.0
17.3
154.9
112.8
8.2%
850.5
41.53
176.9
1,129
-8.6%
48
7.0
81
111
522.0
100.6
4.0
13.1
108.4
431
965

465.1 456.1 454.1
202.8 192.8 190.5
85.6
81.7
81.1
192.2 188.1 187.4
31.3
62.1
61.0
169.4 178.4 191.3
123.2
135.2
147.2
9.5% 11.8% 12.0%
863.2 852.6 853.6
42.48 41.58 41.58
174.8 167.7 165.8
1,110 1,060 1,053-10.1% -14.2% -14.7%
577268
8.5
10.6
9.5
103
121
100
147
160
135
532.0 533.7 537.2
103.5 103.8 101.3
2.4-1.6-2.9
16.3
19.1
16.8
111.1 110.6 108.8
397
489
439
1,071
866
982

FY2018FY2019FY2020Year-over-year
FY2018FY2019FY2020452.4 -1.9% -0.4% -0.4%
186.0 -4.9% -1.2% -2.4%
79.1 -4.5% -0.7% -2.4%
191.9 -2.1% -0.4%
2.4%
63.5 98.6% -1.9%
4.2%
203.3
5.3%
7.2%
6.3%
158.0
9.8%
8.9%
7.3%
12.5%
2.3p
0.2p
0.4p
856.7 -1.2%
0.1%
0.4%
42.43 -2.1%
0.0%
2.0%
161.7 -4.1% -1.1% -2.5%
1,048 -4.5% -0.6% -0.5%-15.1%
-4.0p
-0.5p
-0.4p
66 26.7% -6.4% -1.8%
8.9 24.9% -10.4% -5.7%
87 17.5% -17.4% -12.6%
120
8.9% -15.5% -11.4%
540.1
0.3%
0.7%
0.6%
101.8
0.2% -2.4%
0.5%
0.4 -166% 83.1% -112.6%
15.9 17.5% -11.8% -5.9%
108.0 -0.4% -1.7% -0.7%
382 23.2% -10.2% -13.1%
1,017 -19.2% 13.5%
3.5%Notes:
1. Mtoe = 10 13 kcal
2. Conversion factors for oil: 9,126 kcal/L; Natural gas: 13,043 kcal/kg; Steam coal: 6,139 kcal/kg; Coking coal: 6,928 kcal/kg until FY2012.
2. Conversion factors for oil: 9,145 kcal/L; Natural gas: 13,016 kcal/kg; Steam coal: 6,203 kcal/kg; Coking coal: 6,877 kcal/kg since FY2013.
3. Including large hydro 30 MW or more. 4. Figures in parentheses are old statistical figures. 5. Conversion factor: 1 m 3 = 10,000 kcal

Despite the impact of a colder winter than in the previous year, fuel oil sales in FY2019 continue to decreasereflecting lower oil-fired power generation, the improvement of vehicle fuel efficiency, and fuel switching toother energies (-1.1%). Although sales of diesel oil and jet fuel will remain firm, fuel oil sales in FY2020 willfurther decrease by 2.1% for the eighth consecutive year due to a sharp decline in naphtha sales amid more
frequent regular repairs at petrochemical plants and a substantial fall in heavy fuel oil C sales for power
generation. The FY2020 sales will be equivalent to two-thirds of the FY1999 peak of 246 million kL.

Renewable power generation | The FIT power generation capacity will reach 83 GW
at the end of FY2020
As FIT approval for some non-residential solar PV capacity (such as mega-solar plants) was cancelled due tothe establishment of a deadline for making approved FIT capacity operational, the approved capacity
decreased to 89 GW in June 2019. If the FIT capacity totalling 89 GW becomes operational, the cumulative
burden on consumers will come to JPY60 trillion, including components for operational and transferredfacilities. The estimated burden amounts to an electricity bill hike of JPY3.4/kWh – 15% for the residential
sector and 21% for industry and other sectors. The facilities under construction are expected to become
operational, boosting installed renewable energy-based power generation capacity (including capacity
subject to FIT contract expiration) to 83 GW by the end of FY2020. The completion is accelerated by theEconomic and Energy Outlook of Japan for FY2020| 2

IEEJ © December 2019. All rights reserved.

deadline of the penalty set for the FIT act. Renewable energy-based power generation in FY2020 will total
152.3 TWh (including 76.2 TWh for solar PV, 39.6 TWh for small and medium-sized hydroelectric plants, 30.2
TWh for biomass etc.), accounting for 15% of Japan’s total power generation.

Topic |
1 Residential energy consumption by use
Residential energy consumption after the Great East Japan Earthquake is on a downward trend with thepenetration of energy-efficient appliances and actions for energy saving exceeding the increases in thenumber of households. However, in FY2019, residential energy consumption increases 2.1% with increases
in space heating and water heating due to a colder winter relative to the previous year. In FY2020,
residential energy consumption will slightly decrease 0.2% with less cooling requirements due to a cooler
summer from the previous year and improvements of energy efficiency in the power, etc. Following a slightdecrease in FY2019, energy consumption for cooking will slightly increase in FY2020 reflecting an increasein the number of households and partly offset by lower demand due to lifestyle changes.

2 Impacts of regulation of sulfur content in ship fuel on domestic
vesselUnder worldwide regulations set by the International Marine Organization (IMO), the sulfur content in ship
fuel will be regulated from the current maximum of 3.5% to less than 0.5% after Jan 2020. Sales fordomestic vessels are 3.17 GL in FY2019 and will be 3.09 GL in FY 2020 out of which 0.71 GL and 2.15 GLof Very Low Sulfur Fuel Oil(VLSFO) satisfies the new regulations. With the efforts of both public and private
entities, the VLSFO will be supplied stably. If the price of VLSO is similar to LSC fuel oil C for power utilities,
the price will rise by JPY3.6/Ｌ and the total fuel costs will increase by 11.3 billion JPY(6.3%). If the priceincrease is equivalent to fuel oil A, it will rise by JPY9.7/Ｌ, and for a total fuel costs increase of 30.1 billion
JPY (17.1%). 79 kt of SO2 will be reduced in FY2020, thus, the reduction costs will be JPY140～379
thousands/tSO2. Switching to VLSFO does not contribute to reduce other gases such as CO2. Thus, paying
attention to markets of oil and domestic vessel and implementing appropriate environmental measures will
be important.

Economic and Energy Outlook of Japan for FY2020| 3IEEJ © December 2019. All rights reserved.

3 Impacts of the completion of counterterrorism facilities and of thedelays in nuclear plant restarts
We assessed the impacts of nuclear power generation on 3Es – economy efficiency, energy security andenvironment. In the High Case, where the three plants now in operation would remain in operation with theircounterterrorism facilities completed within their respective deadlines, the cost of fossil fuel imports would bereduced by JPY60 billion, the self-sufficiency rate would be improved by 0.5 points, and CO2 emissions would
be reduced by 3 Mt. Plants which have a deadline for the completion of their counterterrorism facilities after
FY2020 will increase. Smoothing the restart of the nuclear power generation with functional examinations
contributes to achieving 3Es.
Figure 1 | Effect of the nuclear power generation [FY2020, compared with the Reference Scenario]

63.5500High Case
Low Case 8-15-50-0.5

48.7 Fossil fuel imports

spending31.3

2016 2017 2018 2019 2020

JPY trillion

17.3

0.5
0-0.5
-1-1.5

Economic and Energy Outlook of Japan for FY2020

0.1-0.1

-1.1

0.1
-0.1

200-20-40-60-80
-100

4

0.2

-88-0.9

Unit cost of electricity

6-3

0.5

0-4

Energy-related CO2emissions

MtCO2

Low case

0.5
09.9

8

1%point

100

121.4

1.5

162

150

Self-sufficiency rate

JPY/kWh62.1

200 Best Mixed Case

JPY trilion

High case 71.4

Real GDPTWhTWh

Nuclear power generation

0-0.2
-0.4
-0.6

0.09-0.05

-0.43

| 4
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