By:
Lee Clements, Director, Applied SI Research, FTSE Russell
Alexis R. Rocamora, Sustainable Finance & Investment Lead – Asia Pacific, LSEG
The GX transition programme, what it means for investors and how sustainability data and transition indices can help to navigate it.
- Japan’s GX (green transformation) strategy is a broad, ambitious and well-financed transition plan that is designed to cut carbon emissions, improve energy efficiency and boost green innovation.
- Under the plan, ¥3.7 trillion of government transition bonds have already been issued and mandatory emissions trading will start in 2026.
- Carbon intensity, transition efforts and green revenues exposure will become key attributes for assessing the economic potential of Japanese companies.
- LSEG can help with comprehensive SI data covering carbon intensity, TPI climate transition metrics and green revenues. FTSE Russell offers multiple Japanese climate transition equity indices utilising these metrics to help investors allocate capital.
As the world faces the concurrent challenges of the energy transition, energy security and slowing economic and productivity growth, Japan’s government has launched an ambitious $1trn transition plan called the GX (green transformation) strategy. The GX strategy aims to cut emissions, improve efficiency and boost green innovation throughout the Japanese economy.
The GX transition programme
The announcement of Japan’s GX Strategy by Prime Minister Kishida in December 20221 was followed by a series of key policy announcements by successive governments in 2023 and 2024, aiming to guide the strategy’s implementation2.
The GX policy aims to help Japan achieve its 2030 and 2050 climate change targets3 by shifting to clean energy, driving economic growth, and by mobilising ¥150trn ($1 trn) in public-private investments over 10 years. Its implementation relies on two pillars:
- A Green Transformation based on the stable supply of energy: this involves the promotion of energy saving, an increase in renewable energy generation, the use of nuclear power, and support for research and development (R&D) in other technologies, such as the use of hydrogen and ammonia as energy sources and carbon capture and storage (CCS).
- Growth-oriented carbon pricing: this includes the issuance of ¥20trn ($134 bn) of sovereign GX Transition Bonds in 10 years to support upfront investments, the implementation of carbon pricing mechanisms to incentivise GX investments, and enhancements to the financing of support programs for public-private partnerships.
As part of its growth-oriented carbon pricing framework, the GX policy will introduce an emissions trading scheme – called GX-ETS – for carbon intensive sectors4 from financial year 2026, including allowance auctioning for power generation companies from financial year 2033, as well as a carbon levy targeting fossil fuel importers from financial year 2028. These measures will finance the issuance of the GX Transition Bonds, which will serve as a springboard to spur private investments to help meet the promised ¥150trn target5.
In addition, financial support mechanisms—including the Green Innovation Fund, the Economic Security Fund, various tax credits, debt guarantees and supplementary fiscal budgets—are being deployed through public-private partnerships as a way to fund the investments in the technology types shown in the chart below.
AMOUNT OF PUBLIC & PRIVATE INVESTMENT TARGETED UNDER THE GX PROGRAM BY TECHNOLOGY TYPE (in ¥trn)6
Source: Adapted from Ministry of Economy, Trade and Industry (METI, 2024). Past performance is no guarantee of future returns. Please see the end for important legal disclosures.
Unlike most environmental and climate policies in Japan — which are typically initiated by the Ministry of the Environment — GX falls under the purview of the Cabinet Secretariat and the Ministry of Economy, Trade and Industry (METI), reflecting a distinct approach to policy leadership and accountability7. The GX Acceleration Agency was established in 2024 to support the implementation of the GX policy with regards to financial mechanisms, ETS operations, carbon levy collection and research8. Furthermore, the program is supported by the GX League, a forum for cooperation between companies, government and academia established in April 2022, including – as of September 2025 – 747 companies, representing over 50% of Japan’s greenhouse gas (GHG) emissions9.
The GX plans are already far beyond the theoretical phase, with ¥3.7trn ($24.7 bn) already raised by sovereign transition bonds10 and Japanese utilities starting to issue transition bonds to fund projects such as the restarting of nuclear reactors. As we look to 2026, transition bond issuance has the potential to accelerate as the emission trading scheme becomes mandatory.
Carbon intensity, transition and green revenues become key attributes of future growth for Japanese corporates
As the GX policies help to re-orientate the Japanese economy towards low-carbon growth and greater energy efficiency, climate metrics will become increasingly vital in analysing the risks and opportunities faced by Japanese companies:
- The emissions trading scheme and carbon levy will make understanding a company’s carbon intensity – both absolute and relative to its sector peers – critical in assessing its future carbon-related costs.
- As trillions of yen in transition funding will reward those companies that are actively decarbonising, assessing companies’ transition efforts will become crucial in understanding their eligibility for financial support from the GX policy.
- Finally, with funding also directed to the Green Innovation Fund and rising demand for green products and services, determining a company’s exposure to green revenues will be an important indicator of its growth potential.
Originally posted on October 15, 2025 on LSEG blog
PHOTO CREDIT: https://www.shutterstock.com/g/image_ninja
VIA SHUTTERSTOCK
FOOTNOTES AND SOURCES:
1 http://www.meti.go.jp/press/2022/12/20221223011/20221223011.html
2 See notably http://www.meti.go.jp/press/2022/02/20230210002/20230210002.html, https://laws.e-gov.go.jp/law/505AC0000000032, https://cdnw8.eu-japan.eu/sites/default/files/imce/2024.4.18%20METI.pdf and https://www.jaif.or.jp/en/news/7079
3 Japan’s climate targets include a carbon neutrality target (established by Japan’s Green Growth Strategy in December 2020) and an intermediary emissions reduction target of 46% by 2030 (established by Japan’s Strategic Energy Plan in October 2021)
4 Companies emitting >100,000 tons of CO2 per annum, primarily steel, power and chemical
5 https://www.lseg.com/en/insights/ftse-russell/grjapan.com/sites/default/files/content/articles/files/gr_japan_overview_of_gx_plans_january_2023.pdf
6 NB: The total doesn’t exactly add up to ¥150 trillion as those figures include cross-sectoral measures.
7 http://japan.influencemap.org/policy/GX-Green-Transformation-5477
8 https://www.gxa.go.jp/en/
9 https://gx-league.go.jp/member/
10 Between FY2023 and FY2025, Japan has issued or planned to issue a total of ¥3.6671 trillion in GX Economy Transition Bonds, broken down as follows: ¥1.5401 trillion in FY2023, ¥1.4012 trillion in FY2024, and ¥0.7258 trillion in FY2025. Read more in this document from Japan’s Ministry of Finance
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