The annual Japan Update was hosted by the Australia-Japan Research Centre and the ANU Japan Institute on September 4th at The Australian National University in Canberra. The conference brought together an impressive array of experts from both countries to examine Japan’s current trajectory and future prospects. The program covered three main areas — economic developments, foreign policy challenges, and energy security in the context of the global energy transition.

Introduction and Welcome

The Japan Update 2024 conference opened with welcoming remarks from Professor Shiro Armstrong, Director of the Australia-Japan Research Centre (AJRC), and Professor Janine O’Flynn, Director of the Crawford School of Public Policy at the Australian National University (ANU). Their speeches highlighted the importance of the event and the ongoing significance of Australia-Japan relations.

• The traditional owners of the land, the Ngunnawal and Ngambri people were acknowledged
• Professor O’Flynn emphasised the importance of Canberra as a place for sharing knowledge and wisdom, Crawford School and the ANU playing a key role in engagement with Asia and the Pacific.
• The Japan Update was presented as a highlight among the many Japan-related events on campus, organized by the ANU Japan Institute and the AJRC.
• The Japan Foundation and the Research Institute of Economy, Trade and Industry (RIETI) were thanked for providing financial support to the Japan Update.
• Professor O’Flynn outlined various Japan-related activities at Crawford School and ANU, including regular events in Tokyo, such as the annual NBER Japan Project Conference, The Japan Institute’s weekly Japan Institute seminar series, the MOU between the Japan Research Institute and Crawford School for hosting Japanese researchers in Canberra and the joint production of the Japan Australia Investment Report with Herbert Smith Freehills
• Professor O’Flynn noted that it was the 10-year anniversary of former Prime Minister Abe Shinzo’s visit to ANU and suggested organising a visit from the next Japanese Prime Minister.
• The timeliness of the update was highlighted, given the upcoming change in Japanese leadership, recent stock market fluctuations, and the importance of discussing Japan’s energy transition.
• The welcome concluded with Professor O’Flynn expressing her wishes for a productive day of discussions and thanking everyone for their participation.

Economy keynote

View slides - Tomoko Hayashi

The keynote address, delivered by Tomoko Hayashi, Chief Economist and Director General of the Economic Research Bureau in the Cabinet Office of Japan, provided a comprehensive overview of Japan’s current economic situation, recent developments, and future challenges. Hayashi-san highlighted significant shifts in Japan’s economic landscape, including the end of prolonged deflation, changes in wage growth patterns, and the implementation of new economic policies aimed at fostering growth and addressing demographic challenges.

• Japan’s nominal GDP surpassed 600 trillion yen for the first time in history during the second quarter of 2024, marking a significant milestone after three decades of stagnation around the 500 trillion yen level.
• Real GDP growth in the second quarter of 2024 turned positive, driven by domestic demand, particularly private consumption and business investment.
• The country is moving beyond the ‘triple zeros’ era of near-zero inflation, nominal wage growth, and interest rates, signalling a shift towards a more normalised economic environment.
• Wages began to rise in 2023, with the spring 2024 wage negotiations resulting in record-high growth, contributing to increased real income.
• Japan’s inflation rate has been around 2-3% since November 2023, with the Bank of Japan ending unconventional monetary policies like quantitative easing and raising interest rates.
• The government has been actively promoting policies to encourage price pass-through and higher wages, particularly for small and medium-sized enterprises.
• Japan’s current potential growth rate is estimated to be around 0.6%, significantly lower than other countries, highlighting the need for measures to enhance productivity and stimulate investment.
• The country faces challenges related to its ageing population, but Japanese elderly are notably healthier compared to global averages, contributing to a high labour participation rate among older citizens.
• Efforts are being made to mobilise labour and capital towards more productive sectors, addressing issues such as labour market inefficiencies and the concentration of household assets in cash and deposits.
• The government is promoting various initiatives to boost potential growth, including encouraging investment in research and development, enhancing productivity, and improving labour market efficiency.

Economy panel

View slides - Shujiro Urata

View slides - Hiroshi Ohashi

The Economy panel featured presentations from Professor Hiroshi Ohashi of the University of Tokyo and Professor Shujiro Urata of Waseda University, followed by a discussion including Tomoko Hayashi. The panel explored various aspects of Japan’s economic policies, industrial strategies, and international trade relations, providing insights into current challenges and future directions.

• Professor Ohashi discussed Japan’s industrial policies, focusing on the shift from traditional industry-specific approaches to a more holistic strategy encompassing innovation and green technologies.
• The panel highlighted the importance of balancing competition policy with industrial policy, noting that Japan is re-entering the realm of active industrial policy after a period of market-led approaches.
• Japan’s Green Transformation (GX) policy was a key topic, integrating energy, climate, and industrial policies to drive economic growth through clean energy transition and decarbonisation efforts.
• Professor Urata presented on Japan’s international economic policy, particularly its free trade agreements (FTAs) and economic partnership agreements (EPAs), noting that about 80% of Japan’s trade is now covered by such agreements.
• The panel discussed Japan’s efforts to increase inward foreign direct investment (FDI), which remains low compared to other developed economies, and the challenges in attracting foreign companies.
• Japan’s ageing population and its impact on the economy were addressed, with panellists noting both challenges and opportunities, such as the high health levels of Japanese elderly.
• The discussion touched on Japan’s potential growth rate, currently estimated at around 0.6%, and strategies to enhance it, including improving productivity and mobilising resources more effectively.
• Panellists explored the changing dynamics of Japan’s labour market, including the increasing participation of women and elderly workers, and the need for greater labour mobility.
• The impact of technological changes, such as the shift towards electric vehicles, on Japan’s traditional industries was discussed, along with strategies for adaptation.
• The panel concluded by emphasising the need for Japan to continue reforming its economic structures, enhance productivity, and foster innovation to maintain competitiveness in the global economy.

Foreign policy keynote

View slides - Ryo Sahashi

Professor Ryo Sahashi from the University of Tokyo delivered the foreign policy keynote, offering a comprehensive analysis of Prime Minister Kishida’s foreign policy legacy and insights into Japan’s future diplomatic direction. The presentation highlighted significant shifts in Japan’s security posture and international engagements, contextualising these changes within broader regional dynamics.

• Kishida was characterised as a ‘Prime Foreign Minister’, leveraging his extensive experience as Foreign Minister under the Abe administration to shape Japan’s international relations.
• The keynote emphasised Kishida’s success in implementing substantial changes to Japan’s security policy, including increasing the defence budget to 2% of GDP and introducing strike capabilities.
• Japan’s economic security agenda has been significantly enhanced under Kishida, with new legislation and policies aimed at protecting critical technologies and supply chains.
• Kishida’s administration has successfully fostered multilateral security arrangements, particularly strengthening ties with Australia, India, the Philippines, and South Korea.
• The improvement in Japan-South Korea relations was noted as a significant achievement, facilitated by South Korean President Yoon’s more accommodating stance and US mediation.
• Professor Sahashi discussed the evolving nature of Japan’s security environment, highlighting concerns about China, Russia, and North Korea’s increasing military cooperation.
• The keynote touched on Japan’s efforts to balance deterrence strategies with the need for de-escalation policies in the region.
• Sahashi explored the potential foreign policy approaches of Kishida’s successors, suggesting that most candidates would likely continue the current foreign policy trajectory.
• The presentation highlighted the growing importance of economic security in Japan’s foreign policy calculations, including efforts to secure critical supply chains.
• Professor Sahashi concluded by emphasising the need for Japan to prepare for various geopolitical scenarios, including potential changes in US foreign policy, and to consider developing new strategic doctrines beyond the traditional Yoshida Doctrine.

Foreign policy and politics panel

View slides - Alexander Bukh

View slides - Rumi Aoyama

The foreign policy and politics panel, moderated by Dr Lauren Richardson, featured Professor Ryo Sahashi, Professor Alexander Bukh, and Professor Rumi Aoyama. The discussion expanded on the keynote address, delving deeper into Japan’s relations with key regional players and exploring the complexities of Japan’s foreign policy challenges.

• Professor Bukh provided an analysis of Japan-Russia relations, noting that the relationship has effectively reverted to a Cold War-era dynamic following Russia’s invasion of Ukraine.
• The panel discussed Japan’s shift from pursuing a resolution to the Northern Territories dispute with Russia to aligning with Western sanctions, albeit with some continued economic engagement.
• Japan-South Korea relations were examined, with the panel noting the recent improvement but cautioning about the potential fragility of this rapprochement due to domestic political dynamics in South Korea.
• Professor Aoyama offered insights into China-Japan relations, characterising them as relatively stable but increasingly strained, with economic ties remaining resilient despite political tensions.
• The discussion highlighted China’s changing approach to Japan, shifting from government-to-government engagement to a focus on people-to-people exchanges as a means of exerting pressure.
• Panellists explored Japan’s security concerns, noting that while China remains a primary focus, Japan faces simultaneous challenges from Russia and North Korea.
• The panel addressed Japan’s potential role in a Taiwan contingency, suggesting that Japan is preparing for various scenarios but faces limitations in its potential involvement.
• Discussions touched on Japan’s efforts to strengthen ties with Southeast Asian nations and its competition with China for influence in the region.
• The panellists debated the future of Japan’s constitutional revision efforts, noting that recent security policy changes and public opinion shifts have reduced the urgency of formal constitutional amendment.
• The session concluded with reflections on Japan’s need to balance its alliance with the United States, regional security concerns, and economic interests in an increasingly complex geopolitical environment.

Energy security keynote

View slides - Yukari Takamura

Professor Yukari Takamura delivered the energy security keynote, providing a comprehensive overview of Japan’s energy transition, its importance for the country’s future, and the challenges and opportunities it presents. The presentation highlighted the interconnectedness of energy policy with economic and foreign policy considerations.

• The keynote emphasised the critical importance of energy transition for Japan, driven by climate change commitments, economic imperatives, and increasing pressure from the private sector.
• Japan’s long-term goal of achieving net-zero emissions by 2050 and its 2030 climate target of 46-50% reduction below 2013 levels were outlined as key drivers of energy policy.
• Professor Takamura highlighted the growing influence of the business sector in pushing for more ambitious climate action, citing initiatives like the Japan Climate Initiative and Japan Climate Leaders Partnership.
• The economic rationale for energy transition was underscored, including the need to reduce dependency on fossil fuel imports and improve Japan’s trade balance.
• The presentation detailed Japan’s Green Transformation (GX) policy, which integrates climate, energy, and industrial policies to drive economic growth through clean energy transition.
• Japan’s current energy mix was discussed, with renewable energy accounting for 21.7% of power generation in 2023 and ambitious targets set for 2030.
• Challenges in expanding renewable energy were addressed, including grid integration issues, social acceptance, and the need for more effective supporting policies.
• The keynote touched on Japan’s plans for hydrogen and ammonia in its future energy mix, including the recent Hydrogen Promotion Act and subsidy schemes.
• Professor Takamura emphasised the need for a clear plan to phase out unabated coal and fossil fuel power plants, noting the lack of a concrete strategy beyond 2030.
• The presentation concluded by highlighting the importance of carbon pricing mechanisms and the ongoing discussions about introducing a carbon levy and emissions trading scheme in Japan.

Energy security and transition panel

View slides - Rowan von Spreckelsen

View slides - Toshi Arimura

The energy security and transition panel featured presentations from Professor Yukari Takamura, Professor Toshi Arimura, Melanie Brock, and Rowan von Spreckelsen. The discussion focused on Japan’s energy transition strategies, carbon pricing mechanisms, and the implications for Australia-Japan energy relations.

• Professor Takamura outlined Japan’s energy transition goals, including achieving net-zero emissions by 2050 and a 46-50% reduction in emissions by 2030, highlighting the challenges in meeting these targets.
• The panel discussed Japan’s GX policy, which integrates energy, climate, and industrial policies to drive economic growth through clean energy transition.
• The panel explored hydrogen’s potential in Japan’s energy future, with von Spreckelsen explaining production methods and costs. Australia, the US, and Middle Eastern countries were identified as potentially competitive suppliers, with Japan likely to pursue a diversified supply strategy.
• Professor Arimura provided a comprehensive overview of Japan’s evolving carbon pricing mechanisms, noting that a number of carbon pricing mechanisms already exist in Japan at the regional level and that a national emissions trading scheme (ETS) and carbon surcharge are set to be implemented.
• The discussion highlighted Japan’s plans to implement a mandatory ETS by 2026, covering more than 50% of the country’s greenhouse gas emissions, with auctions for the power sector starting in 2033.
• Melanie Brock emphasised the need for better communication and engagement between Australia and Japan in the energy sector, suggesting a business-led reset in discussions.
• The panel addressed the challenges faced by Japanese companies investing in Australia’s energy sector, including regulatory uncertainty and high operational costs. Discussions touched on the labour shortages in the energy transition sector, with suggestions for increased training and the empowerment of women in STEM fields.
• Panellists explored the potential for coordinated frameworks between Australia and Japan to facilitate large-scale investments in energy transition projects.
• The session concluded by highlighting the ongoing importance of the Australia-Japan energy relationship, despite changes in energy demand patterns, and the need for continued collaboration in emerging areas such as critical minerals and hydrogen.

Conclusion

The concluding remarks, delivered by Professor Llewelyn Hughes, synthesised the key themes and insights from the Japan Update 2024, highlighting the interconnectedness of economic, foreign policy, and energy transition issues discussed throughout the day.

• The conclusion emphasised the broad range of common challenges faced by both Australia and Japan, despite differences in geography and population size.
• Professor Hughes highlighted shared economic concerns, including the need to increase total factor productivity, manage competition policy within economic growth strategies, and design effective green industry policies.
• The foreign policy discussions were summarised, noting both countries’ shared regional security concerns, including potential Taiwan contingencies and the implications of AUKUS.
• Energy transition challenges were recapped, focusing on renewables integration, grid management, and the development of international supply chains for energy transition technologies.
• The conclusion stressed the importance of existing bilateral engagement between Australia and Japan, while also suggesting the potential value of additional platforms for discussion and collaboration.
• Professor Hughes noted the possibility of developing track 1.5 or track 2 dialogues to facilitate information exchange and policy discussions between the two countries.
• The importance of people-to-people connections and business networking opportunities provided by events like the Japan Update was emphasised.
• The conclusion acknowledged the efforts of the organising team and the engaged audience in making the event a success.
• Professor Hughes closed by encouraging attendees to continue the conversations and collaborations initiated during the update in the weeks and months to come.
• The final remarks looked forward to the 2025 Japan Update, indicating the ongoing commitment to fostering Australia-Japan relations through such academic and policy-focused events.