Many writers commenting on Japan’s energy sector have been using outdated analytical lenses through which to interpret change (or the lack of it) in Japan’s energy institutions. Typically they argue that Japan’s “nuclear village”, the METI-industry “iron triangle” and the fossil fuels sector are conspiring to stifle any changes that might lead to a low-carbon energy system in Japan. These writers tend to take narrow perspectives on institutional change based on their notions of what a “low-carbon transition” should look like and their evaluation of the power of vested interests within Japan’s energy system.
However, in light of significant institutional and structural changes emerging in the post-Fukushima period, these narrow perspectives need to be revised. The power of large centralized general electricity and gas utilities and industry associations to stifle change and protect their own interests has been seriously undermined, if not rendered inert by recent energy policy reforms. While the government still plays a major role in formulating policies to drive the energy transition, it is no longer useful or relevant to suggest that keiretsu groupings, the political-bureaucratic-corporate “iron triangle” or a “nuclear village” exert powerful influence over energy policies and markets.
Instead, a more complex dynamic is now at play in Japan’s energy sector. Stimulated by significant institutional changes, the “rules of the energy game” have fundamentally changed. The governance of Japan’s energy transition increasingly involves a more dynamic process of interaction and decision-making among a broader range of energy-related institutions than in the past. At the same time, the shift to greater reliance on competitive markets implies less predictability and more ambiguity around reaching the goals of Japan’s latest strategic energy plan. Based on the government’s evident commitment to proceeding with the reforms and the significant institutional and structural changes that have already taken place, it can be concluded that the energy “game” itself is fundamentally changing as Japan’s energy transition continues to evolve.
Notwithstanding the above, the norms, beliefs and ideas that underpin Japanese society remain relatively stable and so we can expect that Japan’s energy transition to follow a pattern distinct from liberalization initiatives in other western countries: firms and markets will adapt to the new rules in a uniquely Japanese way. It is still too early to judge whether the institutional reforms Japan has put in place will ultimately be successful. The country needs to balance a number of competing goals including ensuring energy security, meeting its international climate change commitments and maintaining affordable and reliable electricity services to industry and other consumers. The transition is still in its early stages and so the trajectory of change is still relatively open. However, self-reinforcing processes are likely to close around a particular pathway in the period leading up to full liberalization in 2022 so the government will need to continue to monitor the system closely and fine tune policies as required in order to realize transition goals.