5 Promoting Resource Diplomacy along with Foreign Direct Investment in Japan

(1) Securing a Stable Supply of Energy and Mineral Resources at Reasonable Prices

A The Current Situation Concerning Energy and Mineral Resources in Japan and Abroad

(A) Situation in the World

Structural changes in recent years have been seen in the international energy market with respect to three areas: (1) demand (consumption), (2) supply (production), and (3) resource selection. Regarding (1) demand, global demand for primary energy has shifted towards non-OECD member countries, primarily China and India. With respect to (2) supply, the U.S. became the world's largest producer of both oil and natural gas due to the “Shale Revolution,”¹⁴ and liberalization of export controls on crude oil in December 2015. The U.S. is promoting energy export policies such as further exports of the U.S. liquefied natural gas (LNG). As for (3) resource selection, based on the fact that production and usage on energy account for about two-thirds of greenhouse gas (GHG) emissions, the transitions to cleaner energy resources such as renewable energy are accelerating. In addition, since the Paris Agreement on climate change was adopted in December 2015, companies have made their efforts to further advance towards low-carbonization. In 2021, numerous countries have announced goals to achieve carbon neutrality in the second half of the century, an indication of increasing momentum for decarbonization worldwide. Energy prices, which had been on an upward trajectory since 2021, experienced significant volatility in 2022 amid the energy crisis caused by Russia's aggression against Ukraine. The international community faces the dual challenges of how to stabilize energy markets and achieve decarbonization.

• 14 Shale Revolution: The development in the late 2000s of new technologies for drilling for oil and natural gas contained in layers of rock known as shale in the U.S., and the ability to do so at an economical cost, has led to a significant increase in U.S. oil and natural gas production, affecting many aspects of international affairs.

(B) Situation in Japan

Since the Great East Japan Earthquake, the percentage of fossil fuels out of power generation in Japan has reached about 90% in 2012, up from about 60% before the earthquake, due to the shutdown of nuclear power plants. Japan's primary energy self-sufficiency ratio (including nuclear power), which relies on imports from overseas for almost all of its oil, natural gas, coal and other energy resources, dropped sharply from 20% before the 2011 earthquake to 6.3% in 2014. It remains at a low level compared to other OECD countries despite a recovery to 12.1% in 2019. Approximately 90% of Japan's oil imports come from Middle Eastern countries. With regard to LNG and coal, Japan depends less on the Middle East than for oil but almost completely on Asia and Oceania. Under the circumstances, efforts to secure a stable supply of energy at reasonable prices are becoming increasingly important. At the same time, climate change response measures are also important. In October 2020, the Government of Japan announced its intention to achieve carbon neutrality by 2050, and in April 2021 pledged to achieve a 46% emissions reduction by FY2030 and announced its new reduction goal to continue making further efforts to realize a 50% reduction. Against this backdrop, the Sixth Strategic Energy Plan, approved by the Cabinet in October 2021, lays out specific measures to be taken by 2030 with a continued focus on the principle of “3E+S,” which emphasizes energy source safety (Safety), ensuring of a stable energy supply (Energy Security), the economic efficiency of energy costs (Economic Efficiency), and environmental suitability from the point of view of climate and other elements (Environment).

B Diplomatic Efforts to Secure a Stable Supply of Energy and Mineral Resources at Reasonable Prices

Securing a stable supply of energy and mineral resources at reasonable prices are the foundation for a vital Japanese economy and the livelihoods of its people. MOFA has been strengthening diplomatic efforts with a focus on the following activities.

(A) Gathering and Analysis of Resource-Related Information at Diplomatic Missions Overseas

In order to focus on the acquisition and stable supply of energy and mineral resources, and with a view to strengthening function of diplomatic missions overseas, “Special Assistants for Natural Resources” have been assigned to 60 diplomatic missions in a total of 53 countries as of the end of 2023. MOFA also calls for “Strategy Meetings on Natural Resources” every year, which bring together officials working at diplomatic missions overseas to ensure a stable supply of energy and mineral resources.

(B) Efforts for Energy Market Stabilization

Russia's aggression against Ukraine that began in February 2022 caused energy prices to soar, with oil prices exceeding 130 U.S. dollars per barrel and European gas market prices rising above 70 U.S. dollars per million BTU. This greatly destabilized the energy market.

Amidst this situation, in February and March, Japan diverted to Europe a portion of the LNG handled by Japanese companies in order to alleviate the tight supply and demand of natural gas in Europe. In addition, as a member of the International Energy Agency (IEA), Japan conducted two collective releases of oil reserves from March to April, releasing a total of 22.5 million barrels of petroleum reserves, the largest amount ever.

Amidst this situation surrounding energy, Japan is also encouraging resource-producing countries to increase their production in order to stabilize the energy market. In April 2023, Foreign Minister Hayashi had a telephone call with Foreign Minister Faisal bin Farhan Al-Saud of Saudi Arabia. In July, Prime Minister Kishida held meetings with Crown Prince and Prime Minister Mohammed of Saudi Arabia and the President of the United Arab Emirates (UAE) Mohammed bin Zayed Al Nahyan. In September, Foreign Minister Hayashi once again met with Saudi Foreign Minister Faisal. In September, Foreign Minister Kamikawa met with special envoy for Japan and Minister of Industry and Advanced Technology Sultan Al Jaber of the UAE, while Prime Minister Kishida held a meeting with Crown Prince Mohammed bin Salman bin Abdulaziz Al-Saud of Saudi Arabia. In addition to urging oil-producing countries by taking the opportunity to have successive summit and ministerial-level meetings with them, Japan has also urged these countries at various levels through its diplomatic missions overseas as well as relevant ministries and agencies.

(C) Cooperation with International Organizations Related to Energy and Mineral Resources

Japan makes active use of international fora and rules to coordinate and collaborate internationally towards achieving a stable energy supply and enhancing the resilience of supply chains for critical mineral resources. To ensure energy security and achieve realistic energy transitions toward decarbonization, Japan also communicates to the international community the importance of securing a stable energy supply and diversifying supply sources, as well as securing a stable supply of the critical mineral resources essential for achieving energy transitions.

In January, Parliamentary Vice-Minister for Foreign Affairs TAKAGI Kei attended the 13th session of the International Renewable Energy Agency (IRENA) Assembly (Abu Dhabi, the UAE), where he stressed that renewable energy is the most important option for ensuring energy security, and noted that efforts should be made to pursue the realization of a decarbonized society on a global scale through realistic energy transitions based on the circumstances of each country and region. He pointed out the need to create fair and effective rules such as “Environmental, Social and Governance (ESG)” standards, citing supply chain issues for renewable energy manufacturing and the critical mineral resources needed for it, as well as the disposal of renewable energy manufacturing, as challenges to overcome in achieving a decarbonized society globally. He also expressed a desire to address these challenges at IRENA and work with member countries to resolve them in a coordinated manner.

In July, Parliamentary Vice-Minister for Foreign Affairs Takagi attended the G20 Energy Transitions Ministers' Meeting, which was held under India's presidency. At the meeting, Mr. Takagi spoke on the subject of energy access, stating that he believed that access to affordable energy is a basic human need. He also explained the outcomes of the G7 Hiroshima Summit and stated that Japan would promote cooperation with the G20 on the state of energy access during the energy transition.

In September, Parliamentary Vice-Minister for Foreign Affairs KOMURA Masahiro attended the IEA Critical Minerals and Clean Energy Summit (Paris, France), where he noted that adherence to high ESG standards, greater ESG investment, and increased market transparency are necessary to secure stable supplies of critical minerals. He also stated that concerted action by the international community will be required, and he expressed Japan's intention to continue deepening cooperation with partners worldwide.

In October, Senior Deputy Minister for Foreign Affairs Ono attended a Vice Ministerial Meeting of the Mineral Security Partnership (MSP) (London, UK). While noting the outcomes of the G7 Hiroshima Summit in the area of critical minerals, he pointed out the need for international support to promote high ESG standards and indicated that Japan would strengthen cooperation with MSP member countries and resource-rich countries.

(D) Strategy Meeting on Diplomatic Missions Overseas Concerning Energy and Mineral Resources

Every year since FY2009, MOFA has held meetings attended by embassies and consulates-general established in major resource-producing countries, relevant ministries, agencies and organizations, experts, and representatives from companies. These meetings have provided opportunities to discuss diplomatic initiatives for ensuring a stable supply of energy and mineral resources in Japan, formulate policy, and strengthen cooperation.

(E) Agreement in Principle on the Negotiations Concerning the Modernization of the Energy Charter Treaty

The Energy Charter Treaty (ECT)¹⁵ is a multilateral treaty that entered into force in April 1998 (entered into force with Japan in 2002). It was established as a legal framework for implementing the European Energy Charter, which called for promoting improvements based on market principles in the energy sector in the former Soviet Union and Eastern Europe following the collapse of the Soviet Union, as well as promoting trade and investment activities in the global energy sector. This treaty has been signed by 49 countries and organizations mostly located in Europe and Central Asia (as of January 2024). Discussions for revision of the ECT began in 2020, and an agreement in principle was reached among the parties to the negotiations in June 2022. Japan has contributed to the development of the ECT as the largest contributor of assessed donations. This includes serving as chair for the first Meeting of the Energy Charter Conference in East Asia, which was held in 2016, and hosting the 27th Meeting in Tokyo. Furthermore, in September 2021, HIROSE Atsuko became the first Japanese national to become the Deputy Secretary General of the Energy Charter Secretariat, the administrative body for the ECT.

• 15 The ECT prescribes the liberalization of the trade and transit of energy source materials and commodities, the protection of investments in the energy sector, and other matters. It ensures a stable supply of energy from supply countries to demand countries, contributes to improving energy security for Japan, which largely relies on other countries for energy resources, and provides an important legal foundation for further improving the investment environment for Japanese companies overseas.

(F) Efforts in the Public Relations Field Related to Energy and Mineral Resources

In January, MOFA hosted an in-person seminar titled “The Energy Crisis: Decarbonization and Geopolitics.” The seminar featured a keynote address by IEA Chief Energy Economist Tim Gould, as well as a lively discussion on energy security, decarbonization, and geopolitical risk with panelists including leading academics and representatives from the media and business worlds.

(2) Ensuring Food Security

The global food security situation has deteriorated rapidly and on a global scale, especially in Africa and the Middle East, due to Russia's aggression against Ukraine. This comes at a time when the multiple risks including COVID-19, rising energy prices, climate change, and conflicts are impacting agriculture and food systems, causing supply chain destabilization and disruptions. There also exist many challenges to building sustainable and resilient agriculture and food systems, including how to best use land for food production, conduct agricultural production adapted to climate change, and make efficient use of fertilizers.

According to the State of Food Security and Nutrition in the World (SOFI) 2023,¹⁶ the economic recovery from the effects of the global COVID-19 pandemic is estimated to have reduced the undernourished population in 2022 by about 3.8 million people from the previous year to about 735 million people, or about 8% of the world's population. However, the report also states that the increase in food and energy prices caused by Russia's aggression against Ukraine is undoubtedly a factor hindering further improvement in this area.

• 16 The State of Food Security and Nutrition in the World (SOFI): SOFI is an annual report on global food insecurity and nutrition jointly prepared by the Food and Agriculture Organization of the United Nations (FAO), the United Nations Children's Fund (UNICEF), the United Nations World Food Programme (WFP), the International Fund for Agricultural Development (IFAD) and the World Health Organization (WHO).

A Cooperation in International Frameworks Concerning Food Security

In response to this global food crisis, Japan, holding the G7 presidency in 2023, has made food security one of its priorities, centering its approach on ensuring affordable access to safe and nutritious food for each and every human being. At the G7 Hiroshima Summit in May, Japan, together with the G7 countries and invited countries (Australia, Brazil, Comoros, Cook Islands, India, Indonesia, the ROK, and Viet Nam), issued the Hiroshima Action Statement for Resilient Global Food Security. The statement comprehensively outlines responses to the urgent issues related to food security crisis as well as medium- to long-term actions to build a resilient global agriculture and food system.

In June, in light of the Hiroshima Action Statement, Japan co-hosted the “Dialogue on the Food Security Crisis between Food Exporting and Importing Countries” with the International Grains Council (IGC). With broad participation from governments, international organizations, and the private sector, there were discussions on actions that should be taken by market actors, including exporting and importing countries, during a food security crisis to prevent the situation from becoming worse. The results of this dialogue were compiled into the “Key Principles of Action on Food Security Crises for Exporters and Importers.” In addition, through various international frameworks such as the G20 and APEC, Japan has actively participated in discussions on efforts to ensure food security and build a sustainable and resilient agriculture and food system.

B Main Initiatives in which Japan Participates

On August 3, at the initiative of the U.S., the United Nations Security Council (UNSC) held an open debate on famine and conflict-induced global food insecurity at the UN Headquarters in New York, with State Minister for Foreign Affairs Yamada in attendance. During the meeting, Japan emphasized that addressing famine and conflict-induced food insecurity requires not only short-term efforts such as emergency food assistance, but also medium-and long-term actions based on the concept of human security, such as strengthening the resilience of food systems Japan also stressed that efforts to prevent conflicts, which are root causes of food insecurity, are important, and should be addressed in a comprehensive manner through the Humanitarian-Development-Peace Nexus approach.

C Strengthen Collaboration with International Organizations on Food Security

As a responsible member of the international community, Japan supports the activities of the Food and Agriculture Organization of the UN (FAO), a specialized agency of the UN in the fields of food and agriculture. Japan, a major donor to the FAO and the third largest contributor of assessed contributions, significantly contributes to strengthening global food security through efforts such as providing development assistance in areas of food and agriculture, and creating international rules that include food safety standards. Japan also works to strengthen relations with the FAO through annual strategic consultations and other means.

(3) Fisheries (Tuna, Whaling, etc.)

Japan is one of the major fishing countries and consumers of fishery products in the world. Japan actively contributes through international organizations to the appropriate conservation management and sustainable use of marine living resources.

Japan advocates the view that cetaceans are one of the marine living resources that should be utilized in a sustainable manner based on scientific evidence. Based on the fact that the International Whaling Commission (IWC) has a dual mandate, that is, of “conservation of whale stocks” and “orderly development of the whaling industry,” Japan has sincerely engaged in dialogues based on scientific data collected for more than 30 years. However, it unveiled the fact that it is not possible to seek the coexistence with States that deny sustainable use of whales and focus exclusively on their protection. Therefore, Japan withdrew from the IWC in 2019 and resumed commercial whaling.

Japan limits commercial whaling to its territorial sea and Exclusive Economic Zone (EEZ) with catch limits calculated in line with the method adopted by the IWC, which is based on scientific evidence, and in a manner that will not adversely affect the stock even if the whaling continues for 100 years.

Japan's policy of actively contributing to international cooperation for the proper management of marine living resources has not changed since its withdrawal from the IWC. Japan has been actively involved and has cooperated with international organizations such as the IWC and the North Atlantic Marine Mammal Commission (NAMMCO), including participation as an observer at the Meeting of the IWC, and IWC Scientific Committee meetings.

Japan has also developed non-lethal scientific research on whale stocks, some of which is conducted jointly with the IWC. The results are provided to the IWC and other international organizations as important data that can serve as a basis for realizing sustainable utilization and appropriate management of whale stocks.

Illegal, unreported, and unregulated (IUU) fishing is one of the threats to the sustainable fishing industry. Furthermore, Japan has been encouraging non-contracting parties to sign the Agreement on Port State Measures to Prevent, Deter and Eliminate Illegal, Unreported and Unregulated Fishing (PSMA), which stipulates rules for port states to take measures against IUU fishing vessels, including denial of port entry. At the G7 Hiroshima Summit, it was confirmed that the G7 members will continue to encourage these parties to join the PSMA and shared an intention to take further action to end IUU fishing. Japan is also providing capacity building assistance to developing countries for the purpose of countering IUU fishing.

In the Central Arctic Ocean, there are concerns about the possibility of unregulated fishing in the future due to partial melting of ice caused by global warming. Against the backdrop of these concerns, the Agreement to Prevent Unregulated High Seas Fisheries in the Central Arctic Ocean entered into force in June 2021 with 10 member countries and organizations, including Japan and five Arctic Ocean coastal states. In June 2023, ten countries and organizations, including Japan, participated in the second meeting of the contracting parties, adopted an outline of joint program of scientific research and monitoring in the Central Arctic Ocean and also had discussions on the formulation of conservation and management measures for exploratory fishing.

As one of the largest tuna consumer countries, Japan has joined Regional Fisheries Management Organizations (RFMOs) for tuna, and leads discussions on strengthening conservation and management measures (CMMs) at annual meetings and other occasions. In recent years, results are being seen from active efforts through international resource management. For Pacific bluefin tuna, management flexibility was increased through the decision to allow a higher limit for transferring part of the catch limit of small fish to the large fish limit by a factor of 1.47, at the annual meeting of the Western and Central Pacific Fisheries Commission (WCPFC) in December. For Atlantic bluefin tuna, in light of the recovery of resource levels in recent years, the total allowable catch (TAC) in the eastern Atlantic Ocean was increased by 12.7% over the previous year at the annual meeting of the International Commission for the Conservation of Atlantic Tunas (ICCAT) held in November 2022, and operations were conducted in 2023 based on this level. As for southern bluefin tuna, the Conservation Commission for Southern Bluefin Tuna (CCSBT) held in October confirmed that, based on a recommendation from the Scientific Committee, the TAC will increase by about 17% over the period from 2024 to 2026.

With respect to Pacific saury, the stock has fallen to record lows, and the resulting poor catches have become a problem. At the annual meeting of the North Pacific Fisheries Commission (NPFC) held in Sapporo in March, the NPFC agreed to measures to reduce the TAC by 25%, and for the first time agreed to either reduce the number of vessels in actual operation or to introduce a limit on the number of operating days in order to reduce fishing effort. Measures to protect small fish were also strengthened. For future meetings, it remains important to further improve resource management.

With regard to anadromous fish, discussions were held by the North Pacific Anadromous Fish Commission (NPAFC) to establish conservation measures for these species. At the 30th annual meeting of the NPAFC, held in May, National Fisheries University Director General of School Affairs Department, KONDO Yoshikiyo was elected Executive Director of the Secretariat and assumed office in September.

As for Japanese eel, the second scientific meeting on eel was held in May under the leadership of Japan. Scientific knowledge on the management of eel stocks was shared. At the 16th informal consultation on international cooperation held in July in Tokyo, Japan, the ROK, China, and Taiwan discussed and confirmed the establishment of limits on glass eel stocking in aquaculture ponds and the promotion of cooperation in joint research on Japanese eels.

(4) Foreign Direct Investment in Japan

With regard to promotion of foreign direct investment in Japan, the “Council for Promotion of Foreign Direct Investment in Japan,” which has been held since 2014, is spearheading initiatives to promote activities for discovering and attracting investments. The Council gathers views of foreign company managers and continues to take additional measures such as regulatory and institutional reforms and support measures that help improve the investment environment in Japan, bearing in mind the needs of foreign companies.

Based on the “Five Promises for Attracting Foreign Businesses to Japan,” decided at the second meeting of the Council for the Promotion of Foreign Direct Investment in Japan, held in March 2015, foreign companies have utilized the Investment Advisor Assignment System¹⁷ since April 2016 to meet with the relevant State Ministers in charge. In June 2023, the Cabinet approved the Basic Policy on Economic and Fiscal Management and Reform 2023, which revised the target upward for foreign direct investment stocks from current 80 trillion Japanese yen to 100 trillion Japanese yen by 2030.

Along with implementing various measures adopted by the Council for Promotion of Foreign Direct Investment in Japan, MOFA utilizes diplomatic resources to engage in initiatives through diplomatic missions overseas and foreign direct investment promotion by key government officials, strategically implementing various initiatives towards promoting foreign direct investment in Japan. The “Contact Points for Foreign Direct Investment in Japan,” established at 126 diplomatic missions overseas, have been conducting surveys of requests to improve Japanese regulations and systems, calling for investments in Japan by making use of networks of contacts at diplomatic missions overseas, and holding events to promote foreign direct investment in Japan, among other initiatives. More than 700 activities were conducted by the Contact Points in FY2022. In May 2023, the decision was made to establish “FDI Task Forces” in five locations (New York, London, Dusseldorf, Paris, and Sydney), through collaboration at the level of heads of diplomatic missions and JETRO overseas offices in order to fundamentally strengthen mechanisms to attract human resources and investment from overseas. These task forces are currently working to strengthen operations at each location.

Furthermore, in Japan, MOFA held a Global Business Seminar in March 2023, with the theme of promoting foreign direct investment in Japan. Lectures were given by government and local government officials, representatives of the business community, and businesspeople on recent investment trends in Japan, the Japanese business environment from the view of foreign countries, and efforts and policies to promote foreign direct investment in Japan. Lively discussions took place among approximately 120 participants, including domestic and foreign businesspeople, foreign embassy officials in Tokyo, representatives of foreign economic organizations and chambers of commerce and industry in Japan, and government and local government officials.

• 17 A system that seeks to prepare an environment in which foreign companies that have made important investments in Japan can easily consult with the Government of Japan through State Ministers and other officials from the ministries that oversee the main industries in which these companies engage.

(5) The Road to 2025 World Expo Osaka (Expo 2025 Osaka, Kansai, Japan)

Following the approval of a registration dossier for Expo 2025 Osaka, Kansai, Japan at the General Assembly of the Bureau International des Expositions (BIE) held in December 2020, Japan began activities to officially invite other countries and international organizations to participate in the Expo 2025 Osaka, Kansai, Japan. As of January 2024, 160 countries and regions, as well as nine international organizations, have confirmed their intention to participate.

The Japan Association for the 2025 World Exposition held its “International Planning Meeting” in June 2023 and “International Participants Meeting” in November, inviting countries and regions and international organizations that had been invited to participate to Osaka City to provide various information.

The Expo, which is expected to attract a large number of visitors from Japan and abroad, will be a good opportunity to convey the appeals of Japan to the world and accelerate efforts to achieve the SDGs, which are all to be achieved by 2030, under the theme of “Designing Future Society for Our Lives.” To address various issues such as delays in the construction of official participants' pavilion, MOFA will work closely with relevant ministries and agencies and the Japan Association for the 2025 World Exposition, including through diplomatic channels and overseas diplomatic missions, and will continue to make a concerted national effort to ensure the success of Expo 2025 Osaka, Kansai, Japan.