Japan’s Energy Summit: A Turning Point for Fossil Fuels and Renewables in Southeast Asia

In June 2025, Japan hosted the LNG Producer-Consumer Conference 2025 in Tokyo, an event that gathered representatives from 30 nations. The conference addressed urgent issues surrounding global energy stability, framing liquefied natural gas (LNG) as a “driver of clean economic growth” in Asia. This positioning underscored Japan’s longstanding emphasis on regional fossil fuel development, yet it also highlighted a significant crossroads in Japan’s energy diplomacy.

Shifting Dynamics in Japan’s Energy Strategy

Japan has traditionally championed LNG as the bedrock of economic stability in Asia. However, emerging global trends signal the need for strategic re-evaluation. For instance, China’s ascendancy in renewable energy supply chains poses a competitive challenge, while uncertainties in U.S. trade policy add further complexity to energy planning in the region. These shifting dynamics compel Japan to reconsider its fossil-focused approach.

Southeast Asia is at a critical juncture, grappling with the dual challenges of tariff shocks impacting renewable manufacturing hubs and a pressing need for infrastructure investment to achieve climate goals. As the largest infrastructure investor in Southeast Asia, Japan stands uniquely positioned to accelerate the transition to clean energy instead of prolonging fossil fuel dependence.

Japan’s Fossil Fuel Investment Landscape

A closer examination of Japan’s energy investments reveals a marked inclination toward fossil fuels. From 2013 to 2022, Japanese public financial institutions, including the Japan Bank for International Cooperation (JBIC) and the Japan International Cooperation Agency (JICA), allocated approximately USD 41 billion for fossil fuel projects in Asia. In stark contrast, investments in clean energy like solar and wind totaled a mere USD 9 billion. This disparity underscores the challenge Japan faces in aligning its financial resources with emerging energy needs.

Moreover, Japan’s Asia Zero Emission Community (AZEC) initiative, launched in 2023, professes to include renewables in its framework; however, it primarily emphasizes LNG, ammonia co-firing in coal plants, and carbon capture. This focus risks entrenching Asia in a cycle of fossil fuel dependence, rather than catalyzing a genuine energy transition.

The Case for Diversifying Investments

Southeast Asia requires significant investments to meet its clean energy targets—USD 190 billion annually by 2035 for clean energy alone, alongside an additional USD 300 billion for grid development. Japan has pledged USD 10 billion towards blended public-private financing for the region’s energy transition. However, much of this funding is geared toward hydrogen and ammonia technologies, which may not offer immediate decarbonization benefits.

Why the Hesitation on Renewables?

Japan’s reluctance to invest heavily in renewable energy can be attributed to various structural and strategic factors:

1. Perceived Importance of Fossil Fuels: Japanese policymakers often view LNG as crucial for the growth of emerging Asian economies. During the LNG Producer-Consumer Conference, Japan’s Minister of Economy highlighted LNG’s role as a “realistic transition fuel,” critical to industrial growth.

2. Focus on Self-Development Ratio: Japan is keen on increasing its “fossil fuel self-development ratio” to ensure greater energy security. While diminishing domestic demand poses challenges, Japan aims to raise this ratio significantly by 2030 and 2040.

3. Concerns Over China’s Dominance: The government is focused on mitigating reliance on Chinese renewable energy supply chains. With China controlling over 80% of solar manufacturing, Japan views its investments in alternative technologies like hydrogen and carbon capture as a strategic necessity.

Navigating Trade Disruptions

Recent U.S. trade policy changes, including high tariffs on imports from Asian countries, have added another layer of complexity. Southeast Asian renewable energy exporters face challenges like margin compression and cancelled orders, further complicating investment decisions.

The LNG market’s volatility compounds these issues, creating a precarious situation for countries reliant on energy imports. Amid these dual shocks, Japan has a unique opportunity to pivot toward renewable energy, addressing both supply insecurity and geopolitical risks.

Recommendations for Japan’s Energy Future

To capitalize on this pivotal moment, Japan should consider several strategic actions:

1. Establish a Renewable Self-Development Ratio: Just as Japan tracks fossil fuel security, creating a metric for renewable energy could incentivize investments in clean energy manufacturing in Southeast Asia.

2. Increase Domestic Renewable Targets: By raising its renewable energy targets for 2030 and 2040, Japan can strengthen domestic demand, fostering a stable market for Southeast Asian suppliers.

3. Champion Regional Renewable Growth: Japan should leverage its influence in international financial institutions to mobilize funding for the development of Southeast Asian clean energy infrastructure.

4. Reorient AZEC and Power Sector Engagement: Utilizing its authority over regional energy development, Japan can promote investment in renewable systems, steering clear of further entrenching fossil fuels.

Through these actions, Japan could not only bolster its energy security but also play a significant role in Southeast Asia’s sustainable energy future, fostering a truly resilient and clean energy landscape.