Japan Update: Clean Technology Opportunities

This week, we analyse recent shifts in the economic relations between the United States and China and their potential implications for the production and adoption of clean technology goods and services in Japan.

Recent remarks made by Treasury Secretary Janet Yellen, underscore a troubling trend in China’s clean technology industry. Yellen has pointed out that government backing is leading to an over-abundance of production capacity particularly evident in solar panels, electric vehicles (EVs) and lithium-ion batteries. This surplus, she contends, surpasses both China’s domestic demand and the global market’s capacity. Yellen’s statements mark a departure from conventional economic principles, such as the notion of comparative advantage, which has been a cornerstone of economics for over two centuries. According to this principle, if a country can manufacture goods at a lower cost than another, it should refrain from erecting tariff barriers and instead import the goods, reciprocating with products in which its industry excels. Yellen’s stance challenges long-standing assumptions regarding trade dynamics and the extent of government intervention in the economy.

While this raises legitimate concerns about government support for China’s clean technology industries and measures against China’s potential dumping, it could potentially benefit Japan as a mediator bridging the East and the West and filling in the gap that China may potentially leave – a role it has historically played.

For Japan’s maritime industry, this presents a unique opportunity to leverage its technological expertise to delve deeper into clean technology and sustainable practices, capitalizing on emerging trends in the clean technology market. By investing in research and development and embracing cutting-edge technologies, Japanese shipping companies can enhance their competitiveness and position themselves as leaders in the global clean-tech market.

A key focus, as highlighted on numerous occasions in this week’s SeaJapan event, for Japan would be the advancement of eco-friendly vessels powered by renewable energy sources such as wind, ammonia, hydrogen, and nuclear. By pioneering investments in the construction of such ships, Japan can lead efforts to reduce its carbon footprint and meet the rising demand for sustainable transportation solutions. Collaborating with government agencies and research institutions can expedite the adoption of clean technology in the maritime sector and stimulate innovation in vessel design and propulsion systems.

Moreover, Japan can capitalize on the increasing demand for clean energy infrastructure and logistics solutions in neighbouring emerging markets. By expanding its presence in regions like Southeast Asia, Japanese companies can leverage their expertise to tap into new growth opportunities and diversify their revenue streams. Furthermore, by offering comprehensive end-to-end logistics services, Japan can position itself as a preferred partner for clean energy projects and infrastructure development initiatives worldwide.

In anticipation of impending protectionism policies, Japan can proactively navigate the evolving trade landscape and mitigate potential risks. Strengthening partnerships with like-minded nations and organizations can enable Japan to advocate for open and equitable trade practices that facilitate the smooth flow of goods and services across borders. Additionally, diversifying its supply chain and exploring alternative sourcing options can reduce Japan’s dependence on any single market and enhance its resilience to trade disruptions.

While the evolving dynamics of U.S-China economic relations pose challenges for Japan’s maritime industry, they also present significant opportunities for strategic expansion and development. By embracing innovation, investing in clean technology and advocating for open and equitable trade practices, Japan can position itself as a leader in sustainable shipping and contribute to the transition towards a greener and more sustainable future for the maritime industry. Japan stands on the brink of an opportunity to lead by example, guiding the maritime industry towards a brighter, greener future.

By Eugene Quek, Partner & Head of Projects in Japan