With scarce and rapidly dwindling fossil fuel resources of its own, Japan engages in only a small amount of domestic oil and gas exploration. It relies heavily on fossil fuel imports to meet its energy needs, particularly since the accelerated phase-out of nuclear power following the Fukushima disaster in March 2011. So while Japan does not invest in domestic fossil fuel subsidies, it makes large investments in the development of oil and gas resources abroad (another form of fossil fuel subsidies).
The Japanese government is actively involved in promoting oil, gas, and coal exploration and extraction overseas to secure energy resources. In 2014, Japan was the third largest net importer of oil, and is the world’s top importer of liquid natural gas. Japan provides major national subsidies to promote oil and gas production by Japanese companies overseas and, to a smaller extent, domestically. These subsidies currently total $736 million.
Much of Japan’s subsidies focus on exploration for new fossil fuel reserves. Japan’s largest single subsidy to fossil fuel production is the supply of risk capital to JOGMEC, which supports the acquisition of natural gas rights, with the aim of diversifying Japan’s supplies of natural gas. This subsidy is valued at $458 million per year, but is not included in the national subsidies total, to avoid double-counting.
Due to Japan’s limited fossil fuel resource base, much of the remaining national subsidies for fossil fuel production are targeted towards oil refining. These include the subsidy for oil refining technology programs ($118 million annually) and the oil refining rationalization subsidy ($148 million annually), both of which provided support for research and development of advanced oil refining technologies (OECD, 2015).
The Japanese government provides additional support for oil refining and marketing in the form of the subsidy for structural reform measures ($104 million annually), which provides assistance to oil distributors for business diversification, as well as the oil product quality assurance subsidy ($16 million annually) (OECD, 2015).
The Japanese government funds the large-scale oil disaster prevention subsidy ($8 million annually), which provides upstream producers with oil fences to contain potential oil spills (OECD, 2015).