Japan goes green with £100bn economic recovery

• Boost for electric cars and solar power • Analysts say Kyoto target may still not be met
Justin McCurry in Tokyo and Julia Kollewe
The Guardian, Friday 10 April 2009

Japan will today announce a ¥15tn (£102bn) stimulus package that focuses on boosting the green economy in an attempt to drag the country out of its worst recession since the second world war.
The total is a substantial increase from the £68bn package announced by the prime minister, Taro Aso, on Monday, and is likely to top ¥56tn when other measures such as tax cuts and credit guarantees are included.
"I want to show that Japan's future is not all that dark if we follow this vision," Aso said. "If you just read the newspapers, it seems like tomorrow will be completely gloomy. But this is not the case. There is some light."
In addition to pledging more loans for hard-pressed small businesses and cash for job creation, it will also encourage the start of mass production of electric cars in three years and boost solar power generation to 20 times the current level of 1.42m kilowatts.
The stimulus package also includes a car scrappage scheme similar to the "cash for clunkers" programme being debated in the US Congress.
Motorists will be eligible for between ¥100,000 and ¥250,000 in subsidies if they trade in cars that are more than 13 years old for a hybrid or other environment-friendly vehicle.
Though details have yet to be released, the measures could result in new car sales of between 450,000 to 1.51m, according to the Dai-ichi Life Research Institute.
Together with the introduction of lower taxes on clean-energy cars, consumers replacing an old vehicle for, say, a new Toyota Prius hybrid could make savings of about US$4,000.
The news prompted a stockmarket rally and sent the Nikkei index in Tokyo soaring by 3.7% to 8916.06. Shares in Toyota, maker of the Prius hybrid, rose 4.3%, while those of Sharp, the world's second-largest maker of solar cells, surged 10.7%.
However, analysts said that if the latest stimulus works, the resulting boost in demand for carbon-fuelled electricity could negate any advances made by the wider use of green cars.
The country is only just beginning to address its poor track record on green spending. While industry, the biggest polluter, has been left to aim for voluntary targets, the onus is now on individual householders and businesses to spearhead Japan's version of the Green New Deal.
Until now Japan has set aside only 2.6% of total spending for climate change measures, compared with 12% in the US and 34% in China, an HSBC report said.
Some analysts doubted that the envisaged shift to fuel-efficient cars would have much of an impact on Japan's attempts to meet its Kyoto protocol targets. The country's greenhouse gas emissions rose 2.3% last year, putting them at 16% above the target it has committed itself to achieving by 2013.
"I don't think the stimulus will make any notable contribution to Japan's emission cuts," said Itsuho Haruta of Natsource Japan, adding that the package would make only a tiny contribution to the fall in emissions expected as a result of plunging industrial output.
The government also plans to revive the use of solar energy by expanding a scheme in which power companies - traditionally reluctant to boost their use of renewables - will buy more surplus energy generated by households equipped with solar panels.
It will also set up solar power generators at 37,000 schools and introduce heat-insulating materials and other energy-saving measures in 3m buildings over the next three years.
The measures - which are equivalent to 3% of the country's GDP - were approved by the ruling Liberal Democratic party's executive council. The government is expected to approve the proposals today.
Officials have not said where they would find the extra money, though Aso recently said he would turn to issuing bonds if needed.
Last month, Japan's parliament passed a record ¥88.5tn budget for the new fiscal year, which started on 1 April, including parts of Aso's two previous stimulus packages.