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Reviews, Commentaries, etc. - NOMURA Koji

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"The Seventh Basic Energy Plan by non-governmental volunteers (3rd Edition)" (in Japanese)

Taishi Sugiyama, Koji Nomura, Yoshioaki Oka, Tomohiko Okano, Koko Kato, Naoki Toda, Haruhisa Nakazawa, Tsuruhiko Nambu, Koji Hirai, Ryuzo Yamamoto, Masami Kojima, Tetsuo Sawada, Hiroshi Tanaka, Yoshihiro Muronaka, Masayuki Yamaguchi, and Tadashi Watanabe

2024.04

Internal/External technical report, pre-print, etc., Joint Work

This policy proposal was formulated by a non-governmental group of researchers and practitioners who share a common concern that Japan's current decarbonization-centric energy policy is structurally undermining the nation's security foundations and economic growth. The proposal advances "Energy Dominance" — defined as the stable, large-scale supply of affordable energy — as its guiding principle, and calls for a fundamental reorientation of Japan's energy policy framework. Building on the second edition's treatment of green economic security, the adverse impacts of offshore wind deployment, and a critical assessment of climate modeling, the third edition newly systematizes the historical background and structural problems of Japan's electricity system reforms.
Two dedicated sections — "II.8.1. Pre-Earthquake Electric Power System Reform" and "II.8.2. Post-Earthquake Electric Power System Reform" — have been added to provide a detailed account of the reform trajectory. Particular attention is given to the structural mechanisms by which vertically unbundled market reforms, including the separation of power generation and transmission, have discouraged long-term, planned investment in electricity infrastructure, thereby contributing to deteriorating supply reliability and rising electricity costs. Drawing on this institutional analysis, the proposal argues that reconciling supply stability with affordable electricity pricing requires not sole reliance on market mechanisms, but appropriate state involvement and a reconstituted investment environment.
As a concrete numerical target, the proposal sets the restoration of electricity prices to pre-Great East Japan Earthquake levels (¥14/kWh for industrial users; ¥21/kWh for households), to be achieved primarily through an early increase of nuclear power's share in the generation mix to 50%. The proposal further recommends curtailing the large-scale deployment of solar power and revisiting the accelerated promotion of EVs, both of which are judged to threaten grid stability and the international competitiveness of Japan's core industries respectively. On the international front, the proposal advocates withdrawal from the Paris Agreement and the establishment of a new Japan-U.S.-led "Energy Dominance Agreement." By maintaining the stable utilization of fossil fuels free from binding aggregate emissions targets, the proposal argues that Japan can avert industrial hollowing-out and pursue the policy transformation necessary to rebuild a resilient and prosperous national economy.

"The Seventh Basic Energy Plan by non-governmental volunteers (2nd Edition)" (in Japanese)

Taishi Sugiyama, Koji Nomura, Yoshioaki Oka, Tomohiko Okano, Koko Kato, Haruhisa Nakazawa, Tsuruhiko Nambu, Koji Hirai, Ryuzo Yamamoto, Masami Kojima, Hiroshi Tanaka, Yoshihiro Muronaka, Masayuki Yamaguchi, and Tadashi Watanabe

2024.04

Internal/External technical report, pre-print, etc., Joint Work

This policy proposal was formulated by a non-governmental group of researchers and practitioners who share a common concern that Japan's current decarbonization-centric energy policy is structurally undermining the nation's security foundations and economic growth. The proposal advances "Energy Dominance" — defined as the stable, large-scale supply of affordable energy — as its guiding principle, and calls for a fundamental reorientation of Japan's energy policy framework. The second edition substantially expands upon three areas: the concept of "green economic security" examined in the context of China's industrial and economic strategy; the adverse economic impacts of large-scale offshore wind deployment on the Japanese economy; and a critical assessment of contemporary climate science modeling.
As a concrete numerical target, the proposal sets the restoration of electricity prices to pre-Great East Japan Earthquake levels (¥14/kWh for industrial users; ¥21/kWh for households), to be achieved primarily through an early increase of nuclear power's share in the generation mix to 50%. The proposal further recommends curtailing the large-scale deployment of solar power, which is judged to compromise grid stability, and revisiting the accelerated promotion of electric vehicles (EVs), which threatens the international competitiveness of Japan's core industries, including the automotive sector.
On the international front, the proposal advocates withdrawal from the Paris Agreement, which it regards as lacking realistic achievability, and calls for the establishment of a new Japan-U.S.-led international framework designated the "Energy Dominance Agreement." By maintaining the stable utilization of fossil fuels free from binding aggregate emissions targets, the proposal argues that Japan can avert industrial hollowing-out and pursue the policy transformation necessary to rebuild a resilient and prosperous national economy.

"Energy-Intensive Industries Must not be Driven out of the Country" (in Japanese)

Koji Nomura

(International Environment and Economy Institute) 2024.03

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"Decarbonization and Carbon Taxes" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun) 2024.03

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"The Seventh Basic Energy Plan by non-governmental volunteers (1st Edition)" (in Japanese)

Taishi Sugiyama, Koji Nomura, Yoshioaki Oka, Tomohiko Okano, Koko Kato, Haruhisa Nakazawa, Tsuruhiko Nambu, Hiroshi Tanaka, and Masayuki Yamaguchi

2024.02

Internal/External technical report, pre-print, etc., Joint Work

"Old Man of India" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun) 2024.01

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

”A Quarter Century of Sluggish Electricity Demand of Japan's Economy” (in Japanese)

Koji Nomura

Energy Policy Report (Energy Forum Inc.) 2024.01

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Last December, Kansai Electric Power announced the cancellation of a planned LNG-fired power plant (rated output: 3.7 million kW) in Wakayama City, booking a special loss of as much as 120 billion yen. This business decision, which cited sluggish demand as one factor, carries a weight that cannot be dismissed simply as a "decarbonization shift." What brought about that demand stagnation, and will it persist into the future? At the root of stagnating electricity demand lies the stagnation of domestic production — driven by declining exports of finished goods and the expanding importation of electricity-intensive intermediate goods. And the change in those underlying conditions is itself a consequence of the energy and environmental policies pursued to date. A negative spiral may be at work. The pursuit of policies focused on the superficial outcome of reducing energy consumption has contributed to the hollowing-out of domestic industry; as businesses adapt, power supply plans are revised downward. This compounds the risk of undermining stable supply, discourages domestic investment, and as the introduction of capital embodying new technologies is delayed, industry steadily loses competitiveness. The search for the causes of demand stagnation also overlaps with the task of evaluating the divergence between past demand forecasts and actual outcomes. In the late 1990s, following the Kyoto Conference (COP3), computable general equilibrium models for energy analysis were used in electricity supply-demand projections. Actual electricity demand during the first commitment period (2008–12) came in slightly above the model estimates, but that relationship reversed in the 2010s. Government projections reverted to bottom-up models, into which ambitious energy-saving targets were continually embedded, yet realized figures fell short of and then declined below forecasts. This suggests that structural changes not captured by the models were at work in the real economy. The structural change that unfolded over the past quarter century and became particularly visible from the early 2010s onward was the offshore migration of electricity-intensive goods production. As opportunities to introduce economically justified energy-saving technologies became increasingly limited, policies demanding emissions reductions with little technological foundation were tightened, and companies were quietly compelled to shift domestic production overseas. It would be a mistake to resign oneself to the inevitability of future electricity demand stagnation in a society with a declining population. The global economy has sustained growth of 2–3%, and while the fall of wages for homogeneous labor to half U.S. levels reflects a failure of Japanese economic policy, it also means Japan has accumulated considerable untapped growth potential. Japan should pursue the revival of its manufacturing sector and an expansion of exports while sustaining a weak yen environment; affordable and stable electricity supply is the foundation for doing so. There are also numerous technology-driven sources of demand growth, including digitalization and the spread of generative AI. With decarbonization as a goal sharpened in isolation — without adequate technological foundations or effective international institutional design in place — economies that have moved ahead with low-carbonization have stagnated, while economies outside that effort have expanded and global emissions have risen. This failure has been repeated. The Japanese government congratulates itself on keeping emissions reductions toward carbon neutrality on track as a policy achievement, but it is nothing more than the byproduct of Japan having recorded the weakest economic growth among advanced economies.

"1,000 Trillion Yen in Credit" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun) 2023.12

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

[Commentary / Wave] “¥1,000 Trillion of Implicit Credit to Electricity”
(English translation of an article published in The Denki Shimbun, December 12, 2023)

Professor Tsuruhiko Nambu, an economist who has studied public utilities for over half a century, emphasizes the role of electricity as a platform on which transactions take place. By simply accessing an outlet, users can obtain services anytime and anywhere. Capital goods and durable consumption goods that rely on electricity are purchased under the implicit assumption that this platform is continuously available and reliable.

In inter-firm transactions, it is common for there to be a time lag between delivery and payment. Such transactions inherently involve the risk of non-payment. The provision of goods and services can therefore be interpreted as an extension of credit to the counterparty. Bank lending is, of course, another form of credit. By the same logic, the acquisition of electricity-dependent assets can be viewed as an implicit extension of credit to electricity providers.

If money loses credibility, it is sold off, depreciates, and demand shifts toward real assets such as gold or real estate. If the electricity platform loses credibility, firms will seek cheaper and more stable alternatives—relocating production abroad or substituting imports for electricity-intensive goods. Firms unable to do so will be forced into costly self-provision, such as on-site generation or battery storage. The resulting loss of production opportunities and misallocation of resources would inevitably lead to prolonged economic stagnation.

Many assets accumulated today would become entirely inoperable without electricity, while others would suffer partial dysfunction. Infrastructure such as highways and ports would also face operational constraints. Inventory assets, including refrigerated raw materials and products, would lose their value. Dependence on electricity is not limited to tangible assets; it is even more pronounced in intangible assets, which have expanded rapidly over the past quarter century.

Although it is neither practical nor feasible to directly measure the scale of credit extended to electricity through surveys or experiments, one can approximate its magnitude using highly disaggregated capital stock statistics. Based on the author’s capital database, which distinguishes over 170 asset categories, the present value of assets held under the assumption of reliable electricity supply amounts to approximately ¥1,000 trillion.

In other words, the Japanese economy currently embodies roughly ¥1,000 trillion of implicit credit to electricity. In manufacturing, which accounts for 23% of this total, around 80% of fixed asset value (excluding land) depends on the availability of electricity. In services, the corresponding figure is 67%. Household-owned assets represent 12% of the total electricity-related credit, with 35% of their value reliant on electricity. Even in non-industrial infrastructure, around 30% would suffer some degree of functional impairment in the absence of electricity.

Historically, the management of this implicit credit has been entrusted to private utilities under a cost-of-service regulatory framework. Ongoing liberalization policies have sought to unbundle the values traditionally delivered as a package—such as reliability and decarbonization—and to create separate “markets” for each. Emerging distortions have been addressed in an ad hoc manner. Given the enormous scale of implicit credit, however, private operators may exploit institutional gaps to earn profits exceeding socially appropriate levels. The fundamental role of electricity as a public utility is once again being called into question.

Government policies are also constraining asset utilization through stricter energy efficiency regulations. While new products may benefit from technological improvements, opportunities for efficiency gains in existing assets are limited. If policies—such as energy-saving mandates or renewable energy requirements lacking sufficient technological grounding—effectively restrict the operation of existing assets, the risks embedded in this vast stock of implicit credit will materialize. Policies that undermine ¥1,000 trillion of implicit credit are eroding investment demand and weakening the engine of productivity growth in the Japanese economy.

"Early modern metalwork" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun) 2023.10

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

”Increased Risks to Energy Security due to Restrained Electricity Price Increases” (in Japanese)

Koji Nomura

Energy Policy Report (Energy Forum Inc.) 2023.10

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Japan has been unable to chart an exit strategy from its price subsidies on fuel and electricity. While the original rationale of cushioning against sudden price shocks is already fading, criticism is mounting that prolonged subsidies are distorting the price mechanism. According to estimates by the authors' ECM, total consumer spending even after subsidies is projected to increase by as much as 11 trillion yen from pre-COVID 2019 levels, and when indirect burdens are included, the total increase reaches 16 trillion yen compared to before the pandemic. The global push for net-zero policy is keeping the underlying trend of energy prices elevated. Singapore's per capita GDP exceeded 80,000 dollars last year, reaching 2.4 times that of Japan. To summarize Singapore's approach to low-carbon transition: it has achieved decarbonization by shifting its power mix heavily toward natural gas, without suppressing domestic investment by energy-intensive manufacturing industries and without inducing excessive energy conservation. In 2000, roughly 80% of its electricity generation relied on oil-fired power; over the following twenty years, it raised its dependence on gas-fired generation to 95%. The key difference from Japan lies in the fact that Singapore Power (SP), the state-owned utility, has not been compelled to suppress cost pass-through. Despite average import prices last year being 2.1 times the 2019 level — a more severe hit than Japan experienced at 1.7 times — SP Group recorded revenues of approximately 700 billion yen (in yen terms) last year. The surge in fuel prices was passed through to electricity prices in full. A second difference is that the government has made a forthright public case for the rationality of cost pass-through and the importance of setting electricity prices correctly. Government support was limited to low- and middle-income households, with a monthly rebate of just under 10,000 yen provided to offset utility bill increases. What matters more than temporarily suppressing consumer prices is maintaining stable supply and preserving the financial resilience needed for the long-term journey to net zero. Korea Electric Power recorded a substantial loss again in the second quarter of this year, marking nine consecutive quarters of losses. Japanese utilities have also begun passing through costs, albeit with a lag, but were forced to absorb large losses in the previous fiscal year. Through the assessment of regulated tariffs and government intervention in capacity markets, utilities have found it increasingly difficult to earn legitimate returns commensurate with their costs, and there are voices saying that investment in domestic thermal power generation is no longer viable. But this is not a problem of input prices — it is a distortion caused by the suppression of output prices. Healthy cost pass-through is what encourages investment and is itself a source of the demand that has driven global fossil fuel prices higher. The inability to undertake reinvestment in high-efficiency thermal power generation in Japan is not an inevitable consequence of decarbonization or liberalization — it is the result of government intervention to suppress prices. Keeping electricity prices in check should be a cornerstone of achieving the optimal energy mix, but if that goal is papered over in the short term through price subsidies, underinvestment becomes inevitable. This raises the risk to stable supply and erodes the private sector's financial capacity to pursue the energy transition. The sustainability of global net-zero policy is not assured either. The role of the private sector — which is capable of responding flexibly to changes in the market environment and advances in technology — must not be constrained.

"24-month price escalation" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun) 2023.09

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"Roots of income generation" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun) 2023.08

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

”German Companies are Moving Production Abroad" (in Japanese)

Koji Nomura

Energy Policy Report (Energy Forum Inc.) 2023.07

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

The surge in energy prices in 2021–22 left deep scars on the global economy. In response to the energy security risks that materialized, major economies are exploring divergent paths of adaptation. While some countries have shifted toward expanding the use of nuclear power, Germany — having already phased out nuclear — is seeking a way forward through further promotion of renewables and energy efficiency. Companies, meanwhile, are being compelled to reassess their global production configurations as they watch closely the policy directions of various countries toward net zero. Germany, under the banner of "Efficiency First," has introduced further energy-saving measures through its Buildings Energy Act. Heating systems newly installed from January 2024 onward are required to operate on at least 65% renewable energy, and existing fossil fuel-based heating systems are to be banned from operation by 2045. These heavy-handed policies have caused various disruptions in the market, and forecasts that unretrofitted properties could lose value have already begun to manifest as downward pressure on housing prices. Vonovia, Germany's largest real estate company, has placed climate protection as its top priority, yet was compelled to sell 560 million euros worth of properties to U.S. investors at a 7% discount in order to raise funds. In the heat pump market, where substantial demand growth had been expected, reports emerged that Germany's Viessmann sold its heat pump division to U.S.-based Carrier Global — prompting widespread concern that history may repeat itself, as it did with solar panels. Major German chemical companies such as BASF are planning to cut thousands of domestic jobs while shifting investment abroad, as future energy supplies at prices comparable to what was once paid for Russian pipeline gas can no longer be anticipated. The retreat from domestic production is not confined to multinational corporations. A survey by the Federation of German Industries (BDI) found that 16% of responding companies have already taken concrete steps to relocate part of their production and employment outside Germany, with a further 30% having plans to do so. The German government is considering substantial price subsidies to suppress industrial electricity prices, but the more fundamental problem lies in the incompatibility with climate policy, which is driving up the cost of CO2 emissions. The harms of imposing disproportionate burdens on specific segments — such as energy efficiency measures and renewables — beyond internationally harmonized carbon price levels are intensifying. There is also an inherent dilemma: the maintenance and expansion of government-created demand, which has enhanced market predictability, has simultaneously increased the probability of success for China's state-led manufacturing model, further disadvantaging the competitive position of private-sector firms within Germany. The result has not been a triumph of climate policy, but rather a powerful driver of increasing global fossil fuel consumption and CO2 emissions. The failure of carbon leakage that has persisted for a quarter century appears poised to repeat itself. Industrial production data for April of this year shows Germany still mired in prolonged stagnation, running 2.4% below its 2015 level. Japan's stagnation is even more severe, at minus 4.4%. While the attractiveness of domestic production has grown amid de-risking from China and tolerance for a weaker yen, Japanese companies are quietly proceeding with their own adaptation — scaling back domestic production of electricity-intensive goods. What Germany and Japan share is a widening divergence between corporate growth opportunities and macroeconomic growth. If the broader macroeconomy is damaged, the long-term economic burden of net zero will not be accepted.

"Diaspora" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun) 2023.06

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"Questioning the question" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun) 2023.05

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"Price Elasticity of Energy Consumption in the Pandemic Period" (in Japanese)

Koji Nomura

Energy Policy Report (Energy Forum Inc.) 2023.04

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

The roughly two-year surge in energy prices has entered a brief pause, owing to the price shock mitigation measures for electricity and gas (totaling 3.1 trillion yen) scheduled to run for nine months from meter readings in February 2023. However, this has done no more than suppress the immediate direct burden through subsidies, and the future trajectory of prices remains highly uncertain. International spot prices for natural gas fell sharply from their peak in August of last year, but in Japan — where long-term contracts had helped contain the impact of the price surge — import prices continued rising through January of this year. In Europe as well, with China's full demand recovery anticipated, IEA Executive Director Birol has emphasized that "Europe has not yet emerged from the crisis." The subsidy-based mitigation measures have drawn considerable criticism from economists, who argue that they impede the consumption restraint that rising prices would otherwise achieve. However, such faith in the price mechanism rests on an overestimation of the price elasticity of energy consumption. According to the ECM, the comprehensive price of final energy consumption rose by 71% from January 2021 through January of this year, just before the mitigation measures took effect. Over that same period of more than two years, energy consumption barely changed, placing the elasticity close to zero. Even restricting the analysis to the post-2022 period of declining consumption, and applying a generous estimate, the price elasticity comes to no more than 0.24. The experience of the historically unprecedented price surge in recent years would suggest that the price elasticity of energy consumption has indeed been low. Model-based assessments that continue to offer optimistic scenarios in which the energy transition can proceed at low cost invariably embed overestimates of both price elasticity and technological innovation. The trend in energy consumption during this period divides broadly into two phases: an increase in 2021 and a decline thereafter. The first half strongly reflects the recovery from the pandemic, with consumption returning to pre-pandemic levels by end-2021. At the time, Green Recovery was proclaimed with almost no supporting evidence, but the reality was nothing more than a return to the pre-COVID trajectory. While the measured price elasticity is low, its interpretation also warrants care. The first concern is that it fails to capture the negative externalities produced by consumption restraint. Real-world reductions in consumption may be achieved at a non-monetary cost: in areas lacking alternative means of transportation, reduced energy use may constrain how people spend their leisure time, and the increased financial burden may be suppressing spending on education. Over the medium to long term, adverse effects on health, schooling, and employment may follow. The second concern is that price elasticity estimates incorporate the effect of offshoring electricity-intensive production. Carbon neutrality declared without economically viable means of achieving it depends on expectations of future technological breakthroughs and dramatic cost reductions, and companies — while offering nominal expressions of support — are quietly proceeding with the relocation of electricity-intensive production overseas. In Europe, it is reported that even major German chemical companies are positioning themselves to cut domestic employment and shift investment abroad. The focus of attention is shifting away from the price surge itself toward its medium- and long-term consequences.

"Entangled Thread" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun) 2023.04

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"A Priori Self-respect" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun) 2023.03

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"Loopholes That Cannot be Closed" (in Japanese)

Koji Nomura

Wave (Denki Shimbun) (The Denki Shimbun) 2023.02

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

"Increased Indirect Electricity Imports - A Factor Leading to Prolonged Economic Stagnation" (in Japanese)

Koji Nomura

Energy Policy Report (Energy Forum Inc.) 2023.01

Article, review, commentary, editorial, etc. (trade magazine, newspaper, online media), Single Work

Japan's electricity demand peaked at 1.20 trillion kWh in fiscal 2007 and has continued to decline, with fiscal 2022 expected to recover to only around 1.02 trillion kWh. Although real GDP expanded by 3.7% over these fifteen years, electricity consumption has fallen — a trend that might appear to reflect the fruits of conservation efforts by households and businesses. Behind that surface, however, the import ratio of electricity has been expanding. Japan, not connected to any international power grid, has zero direct electricity imports. Yet when Japanese companies scale back domestic production of electricity-intensive intermediate and final goods and switch to imported alternatives, this is effectively the same as importing electricity indirectly. While this may be the cheapest way to import electricity, the reaction it produces is a deflationary force that reduces domestic effective demand. According to estimates of the indirect electricity import dependency (EID) based on input-output tables, Japan's EID as a single-country economy stood at 21.8% in 2015. Japan's EID has undergone two major turning points. From the low teens in the 1960s, EID rose to around 20% in the wake of the two oil shocks, before reversing in 1980 and successfully being brought down to 10.3% by 1995. This achievement is thought to owe much to the trust built through the realization of oil substitution via nuclear power and LNG-fired generation and the dramatic reduction in power outage hours — demonstrating that stable supply could be maintained while containing price increases. From 1995, however, EID turned upward again, retreating by 2018 to 22.8%, back to the levels of the late 1970s.
Of the total decline in electricity demand from peak fiscal 2007 to fiscal 2022, the rise in EID over that period — from 19.2% to 22.8% — is estimated to have inflated the apparent reduction in domestic demand by roughly one third. Taking a longer view, if the fiscal 1995 value — the turning point at which EID resumed its upward trend — is held fixed, the hypothetical demand figure for fiscal 2022 would exceed the actual figure by 0.18 trillion kWh. This suggests that even under the current final demand structure of the Japanese economy, 1.20 trillion kWh of electricity demand would have existed had the import dependency ratio been kept at its 1995 level. The factors behind the renewed rise in EID lie on the supply side. By the 1990s, cheaply available energy-saving technologies were already becoming constrained, and concerns that further energy-saving investment would undermine overall production efficiency had grown substantially. Against this backdrop, the strengthening of domestic measures for energy conservation and emissions reduction, the promotion of renewables leading to higher electricity prices and threats to stable supply — the reaction to these policies compelled companies to adapt by shifting production overseas. It is this dynamic that is likely to have driven the sustained rise in EID. The visible stagnation in electricity demand has tended to be interpreted as the inevitable result of economic downturns or the outcome of conservation efforts. The less visible expansion of indirect electricity imports, however, has emboldened the government to deepen its confidence in further regulatory tightening, while simultaneously serving as a powerful and entrenched deflationary force — draining effective demand and driving Japan's prolonged economic stagnation.

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