Japan’s cabinet has approved a record JPY122.31 trillion (US$780 billion) budget for the fiscal year starting April 2026, with heavy allocations for green transformation, next-generation energy and supply chain resilience.
The Ministry of Economy, Trade and Industry (METI) earmarked JPY605 billion (US$3.8 billion) for green transformation (GX) and renewable energy initiatives, as the government seeks to cut emissions while securing stable power supplies for industry and fast-growing digital infrastructure.
The package includes JPY84 billion (US$536 million) in subsidies to promote deep energy efficiency improvements at factories and other facilities, as well as funding to accelerate the development and deployment of next-generation renewable technologies.
METI set aside JPY49.7 billion (US$317 million) to support mass production of perovskite solar cells, which Japan sees as a key technology to expand solar power generation, and JPY12.2 billion (US$77.8 million) for preliminary surveys to extend offshore wind farm development into the country’s exclusive economic zone. Another JPY36.3 billion (US$231 million) will be used to bridge price gaps for hydrogen and other high-cost clean fuels to encourage wider adoption.
Under a new “GX strategic regions” programme, the government allocated JPY2.1 trillion (US$13.4 billion) over five years to subsidise corporate investment in factories and data centres that run entirely on nuclear or renewable power. Of that, JPY40 billion (US$255 million) is earmarked for 2026.
Spending on next-generation nuclear energy will also rise, with JPY122 billion (US$778 million) allocated to advance demonstration reactor projects such as fast reactors, a type of nuclear reactor that uses fast-moving neutrons. Grants to municipalities hosting power-generation sites will increase by JPY1.7 billion (US$10.8 million) from the previous year to JPY79.4 billion (US$506 million).
Separately, the Ministry of the Environment boosted funding for recycling rare metals and rare earths to JPY37.9 billion (US$241.8 million), about 1.6 times the previous year’s initial budget, aiming to strengthen supply chains by recovering materials from discarded electronic equipment and ensuring stable access for manufacturers.
To address rising emissions from data centres, whose power demand is surging, the environment ministry allocated JPY900 million (US$5.7 million) for the development and demonstration of advanced cooling technologies. It also set aside JPY2.6 billion (US$16.5 million) to promote the implementation of carbon capture, utilisation and storage (CCUS) technologies, including artificial photosynthesis that produces fuels using sunlight and carbon dioxide.
To address human-wildlife conflict, the government earmarked a record JPY6.2 billion (US$39.5 million) to tackle damage caused by bears, covering personnel costs for licensed municipal “government hunters”, as well as the use of information and communications technology, drones for population management, and the installation of electric fences in national parks.
The draft budget will be submitted to parliament for deliberation in the coming weeks.
The budget priorities sit within Japan’s broader long-term climate strategy, under which the government has pledged to achieve net-zero greenhouse gas emissions by 2050, aiming for a 46 per cent reduction from 2013 levels by 2030 and further stepped targets of about 60 per cent by 2035 and roughly 73 per cent by 2040 on a linear path to carbon neutrality.
This approach is part of Japan’s revised energy and climate plans, which emphasise a dramatic expansion of renewable energy and maximum safe use of nuclear power alongside energy efficiency, hydrogen and carbon capture technologies to balance decarbonisation with energy security and economic growth. The government’s clean energy strategy also envisages significant public and private investment over the next decade to shift industrial structure and achieve its long-term climate goals.
