IEEJ: October 2011 All Rights Reserved

Special Bulletin
A Japanese Perspective on the International Energy Landscape (60)

October 3, 2011

Japan's Energy Policy Reform
Ken Koyama, PhD
Chief Economist
Managing Director
The Institute of Energy Economics, Japan
As more than six months have passed since the March 11 Great East Japan Earthquake, thegovernment has started full-fledged discussions on how best to reform Japan's energy policy with thefirst meeting of Basic Issues Committee of the Advisory Committee for Natural Resources andEnergy on October 3. In parallel, members of the Energy and Environment Council of the Cabinet
Secretariat's National Policy Unit are deepening their discussions on the energy policy reform. The
government is thus making all-out efforts to reform the energy policy as the key to Japan's nationalstrategy.
Energy is an important good indispensable for civil life as well as economic and industrialoperations. Energy can also be viewed as a highly strategic good as various developments regarding
energy production, trade and procurement affect international relations and the balance of power. It
may be needless to say that the energy policy is very important for Japan that depends on imports forabout 90% of its energy supply.
The reform comes only 16 months after the Japanese government adopted the Basic Energy
Plan as the core of Japan's medium to long-term energy policy in June 2010. The unprecedented
earthquake, tsunami and nuclear plant accident have forced the government to revise the Plan. The
present Basic Energy Plan features a proactive nuclear promotion policy calling for constructing 14
nuclear reactors and raising the average capacity utilization rate of nuclear reactors to 90% (fromsome 60% in FY2008) by 2030. But the tough realities after the earthquake and nuclear plant
accident have led the government to consider a new policy. In the past 4 decades, the government
has consistently considered and made an energy policy to deal with energy challenges of that days
Given the significance of the disaster, great future uncertainties and citizens' grave concerns onenergy, the coming energy policy reform could be as important as or even more important than areform that followed the first and second oil crises.
At the Basic Issues Committee, 25 experts representing various positions are undertaking
thorough energy policy discussions on which the fate of Japan's energy future depends. I hope that
the Committee will form a consensus and achieve an excellent policy reform through sweeping,serious discussions. With this hope in mind, I list the following key points regarding the policy
reform, expecting to make contributions to invigorating and developing energy policy discussions.
The first point is that the objective circumstances surrounding Japan’s energy problems are
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IEEJ: October 2011 All Rights Reserved

really tough. The Basic Energy Plan’s three key challenges, called the three Es, covering energy
security, environmental conservation and economic efficiency/growth, have remained importantsince the existing Plan was worked out. Rather, the three Es have become more difficult to achieve.
The energy security challenge has become more complicated and serious as growing geopoliticalrisks arising from the liquidation of the Middle East and North Africa situation since early this year
have been coupled with expanding energy demand in China and other emerging countries and an
intensified global race for resources under the destabilization of international governance systemwhich is characterized by China’s rise and a relative decline in the influence of the United States.
The destabilization of the world economy amid European and U.S. sovereign risks has accelerated
the confusion and complication of the situation. At present, international negotiations on global
warming prevention measures have lost momentum due to changes in political, economic and energy
conditions in major countries. It has become difficult to maintain the momentum for forming a
consensus on a post-Kyoto Protocol framework for the reduction of greenhouse gas emissions. But
climate change is an important problem in which global interests are at stake. Its importance is still
great from the long-term perspective. We must recognize the tough objective circumstances
surrounding Japan and base our energy policy discussions on the circumstances.
The second point is that we must pay attention to the energy issue’s influences on a broad
range of areas and discuss the issue from a wide range of viewpoints covering diplomacy, domestic
politics, influence of local government, local autonomy, economics, industry, technology,environment, culture and society. At the same time, we must devise ways to prevent wide-ranging,extensive and comprehensive discussions from losing focus. The quantitative consideration of core
problems based on objective, neutral and rational analyses and data may play a key role inpreventing discussions from losing focus.
The third point is that we must base energy policy discussions on international viewpoints.
The energy policy reform involves important problems including energy source choices, future ofenergy industry perspectives and the role of government. In discussing these problems, we must
recognize the true realities of these problems in the world and major countries and fully utilize
existing knowledge about the problems. Of course, we must take into account Japan’s uniqueconditions as well. But we must take care to prevent discussions from becoming inward-looking. In
addition to passive international viewpoints for learning lessons from developments in the world, wemust be conscious of active international viewpoints to build an external energy strategy covering
diplomacy with resource-rich and major resource-consuming countries as well as the procurement ofenergy resources.
The frequently cited concept of “the best mix” may be the most important at present. This isbecause we now must consider not only the best mix of energy sources portfolio based on
advantages and disadvantages of various widely used sources, but also the best mix of domestic andexternal energy policies. Furthermore, I think that we must form a national consensus based on thebest mix of views and arguments from the government, the industry, citizens, experts and mediaorganizations. Once an energy policy reform is compiled through national discussions, these parties
will be required to make utmost efforts to develop and implement the energy policy based on theirrespective standpoints. At the same time, however, the government has a great responsibility for the2

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discussions as indicated by the term “energy policy.” The government may be required to takeresponsible leadership in discussing, making and developing the policy on energy problems, whichhave fundamental impact on the backbone of Japan.

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