JETRO Invest Japan Report 2021
Chapter2. Japan's Business Environment and Foreign-Affiliated Companies
Section2. Improving the Business Environment in Japan
Government Initiatives for Simultaneous Achievement of Green and Digitalization

Moves toward realization of Carbon Neutrality

In October 2020, the government declared "carbon neutrality by 2050," a goal to reduce overall greenhouse gas emissions to zero by 2050. To achieve this goal, The Ministry of Economy, Trade and Industry has established a tax system to promote investment in carbon decarbonization for its acceleration. Under the tax system, a tax credit of up to 10% or a special depreciation of 50% will be applied to the introduction of 1) production facilities for fuel cells, compound power semiconductor, and other products that have a significant decarbonization effect, and 2) facilities that achieve both decarbonize of production processes and increase of added value, such as the introduction of state-of-the-art production facilities (Chart 2-7).

The Ministry of Economy, Trade and Industry established the "Green Innovation Fund Project" of 2 trillion yen within the New Energy and Industrial Technology Development Organization (NEDO), which provide continuous support for 10 years, from R&D and demonstration social implementation, to companies addressing the "carbon neutrality by 2050" as their business challenge. The project aims to incorporate overseas advanced technologies to have ripple effects on the domestic economy. Corporate support through the Green Innovation Fund is included in the Basic Policy on Economic and Fiscal Management and Reform (2021), and is also referred to in the Strategy for Promoting Foreign Direct Investment in Japan.

Formulation of semiconductor and digital industry strategy

The spread of COVID-19 has accelerated the global response to the digitization of society, and the importance of semiconductors, the core products of digitization, has been reaffirmed. With the global supply and demand situation tightening, securing semiconductors is important from the viewpoint of economic security, and energy saving and greening of semiconductors are essential to aiming at carbon neutrality by 2050. Under the major direction of the Basic Policy on Economic and Fiscal Management and Reform 2021, the Action Plan of the Growth Strategy Execution Plan, approved by the Cabinet in June 2021, clearly states the promotion of energy saving and greening of digital devices and information and communications as well. Under these circumstances, METI established the “Semiconductor and Digital Industry Strategy Review Conference” in March 2021 to discuss the future policy direction of the semiconductor, digital infrastructure, and digital industry, and compiled the “Strategy for Semiconductors and the Digital Industry” in June of the same year.

Digitization is supported by digital industries utilizing clouds, etc., digital infrastructure such as data centers, and semiconductors used in electronic devices. METI has included policies to promote priority investment in these three fields into the Strategy for Semiconductors and the Digital Industry. Specifically, it will proceed with locating new data centers in Japan and promote the systematic development of data centers and support for investment. Japan will play a central role in semiconductor technology and its production by building interdependent relationships in collaboration with Western countries as well, aiming to achieve simultaneous and early realization of digitization and greening through "contribution to carbon neutrality by making the economy and society smarter through the use of digital technology, and simultaneously improving energy efficiency decarbonization in the digital field in order to minimize the increase in energy and environmental impact" (Strategy for Semiconductor and Digital Industry Strategy).

Furthermore, the government is considering a bill to amend the related law, which includes a subsidy system for semiconductor-related capital investment, with the aim of building a stable production system for semiconductors in Japan.