Japan’s Ministry of Finance, together with the Cabinet Secretariat, the Financial Services Agency, the Ministry of Economy, Trade and Industry and the Ministry of the Environment, has published a revised Japan Climate Transition Bond Framework for sovereign climate transition bonds issued under the GX Economy Transition Bond program. The framework underpins roughly JPY 20 trillion of upfront Green Transformation investment over 10 years and updates the policy basis for the bonds to reflect Japan’s latest decarbonization plans, including greenhouse gas reduction targets of 60 percent by fiscal year 2035 and 73 percent by fiscal year 2040 from fiscal year 2013 levels, as well as the February 2025 Global Warming Countermeasures Plan, the Seventh Strategic Energy Plan, the GX2040 Vision and the March 2025 Basic Guidelines on Climate Transition Finance. The revised framework retains a use of proceeds model focused on projects that are difficult for the private sector to finance alone and that support emissions reduction, industrial competitiveness and economic growth. Eligible categories span energy efficiency, renewable energy, low-carbon and decarbonized energy, clean transportation, industrial transition and circular economy projects, and natural resource and land use measures, with examples including offshore wind, perovskite solar cells, advanced reactors, hydrogen and ammonia supply chains, batteries, semiconductors, zero-emission ships, sustainable aviation fuel, carbon capture and storage, and resource circulation. It also sets exclusionary criteria, annual allocation and impact reporting, and annual independent verification until proceeds are fully allocated. Bond redemption remains tied to future carbon pricing revenues, including a fossil fuel surcharge from fiscal year 2028 and paid auctions for power generation companies from fiscal year 2033, and the framework is scheduled for review by fiscal year 2030 at the latest.

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