Japan Paving the Way for Green Transition with Climate Bonds
Japan becomes the first ever country to sell its sovereign bonds to achieve its climate targets. Earlier in February, Japan managed to sell ¥800 billion in bonds to private investors. The Japanese government aims to sell ¥20 trillion in bonds as part of its Green Transition (GX) program.
GHRTV
19-02-2024
Dara Masita
Human Rights Researcher,
Global Human Rights Defence
Japan showed the world how innovative it can be again. Last week, Japan became the first country to auction off its sovereign bonds to fund its energy transition in a bid to combat climate change. In their first round of auctions, the Japanese government managed to sell ¥800 billion (€4.95 billion, $5.33 billion) of ten-year bonds. Nevertheless, their goal is to sell ¥20 trillion in sovereign bonds.
The authorities are selling these bonds to private investors, who will receive in the upcoming years periodic interest payments in addition to the nominal value of the bonds. It highlights a great strategy from Japan to inject private finances into meeting climate mitigation and adaptation targets.
The basis for selling the climate bonds is in the Climate Bond Transition Framework, published in November 2023. Additionally, the Japanese government also welcomed its Green Transition (GX) Basic Policy program, where ¥150 trillion will be invested in the span of 10 years to achieve their Nationally Determined Contribution to the Paris Agreement. Japan will invest these funds into technology. Several upcoming projects include the development of advanced batteries to reduce long-term emissions, wind-power generators, carbon recycling technology, and aircraft using green fuel.
The introduction of these climate bonds has been received positively by the domestic financial sector. Other than that, various foreign organisations, such as the Climate Bonds Initiative, have applauded Japan for their efforts. However, there are still individuals who are doubtful of these initiatives. The main concern would be the actual allocation of funds and whether this would lead to a real green transition or represent just another case of green-washing.
Nonetheless, Japan has once again pioneered an idea. This auction highlights how countries could still adhere to their climate targets while having a limited budget. Hopefully, this scheme will be a success, showcasing Japan’s commitment to its climate targets.
Sources and further reading:
Julian Ryall, ‘Japan aims high with climate bonds for clean tech and energy’ (DW, 2024) <https://www.dw.com/en/japan-aims-high-with-climate-bonds-for-clean-tech-and-energy/a-68297810> accessed 20 February 2024.
‘Japan leads the way as investors turn their sights to transition impact’ (Environmental Finance, 2024) <https://www.environmental-finance.com/content/the-green-bond-hub/japan-leads-the-way-as-investors-turn-their-sights-to-transition-impact.html> accessed 20 February 2024.
Junko Fujita, ‘Japan's first sovereign green bonds expected to attract healthy demand’ Reuters, 2024) <https://www.reuters.com/sustainability/sustainable-finance-reporting/japans-first-sovereign-green-bonds-expected-attract-healthy-demand-2024-02-13/> accessed 20 February 2024.
