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Under current policies, Japan’s economy could suffer from an almost 10 per cent annual hit, amounting to approximately JPY 952 trillion (USD 9.2 trillion) between now and 2050.
Asia is amongst the world’s most climate change-vulnerable regions. Seven out of Japan’s top 10 trading partners are in this region. Economic impacts due to inadequate climate ambition are forecasted to be higher for Japan as well as the rest of Asia than those for the U.S. and Europe.
The new economic modelling by the Network for Greening the Financial System (NGFS)* analyses various climate scenarios, including the current Nationally Determined Contributions (NDCs) under the Paris Agreement.
The NGFS’ modelling also includes a transition to Net Zero scenario, which shows vastly superior economic results for the Japanese and global economies.
Rebecca Mikula-Wright, CEO, AIGCC said: “Japan cannot afford to delay aligning with science-based pathways to transition.
“Physical damages to Japan and the broader Asia region have been relentless this year. Typhoons have wreaked havoc on Japan’s manufacturing industry. High sea surface temperatures resulting in record-breaking rainfall have also triggered severe floods and landslides. These impacts will only continue to be more devastating and have a compounded effect in the coming years and decades.
“There is a huge incentive for Japan to leverage its position as a leader in technology and innovation, including in renewable energy and other low carbon solutions. A transition within the NGFS’ Net Zero Scenario would bring positive impacts to GDP, amounting to approximately JPY 13.6 trillion (US$130 billion) per annum by 2050.
“To safeguard its future, and to protect millions of lives that are at stake because of the climate crisis, Japan must take the initiative in committing to a strong mid-term emissions reduction target supported by an ambitious climate policy. ”
Aina Fukuda, Head of Japan Investment Stewardship, Legal and General Investment Management (LGIM), said: “We believe Japan is at a pivotal moment, where setting ambitious emissions reduction targets and accelerating renewable energy adoption could unlock substantial economic opportunities.
“The current linear reduction target under consideration highlights questions about the pace and ambition needed to capitalise on these opportunities and avoid severe consequences.
“Through our engagement we consistently emphasize to policymakers that decisive measures aligned with a 1.5C pathway are crucial for Japan to maintain its competitive edge, strengthen its position in global supply chains, and access capital as the global economy shifts to net-zero. These steps are essential to enhance Japan’s economic resilience and leadership in technology and innovation.”
*The analysis is derived from new data released by the Network for Greening the Financial System (NGFS) – a group of 141 central banks including Bank of Japan, Bank of England, European Central Bank, People’s Bank of China, Reserve Bank of Australia, Reserve Bank of India and US Federal Reserve. It calculates the broad economic effects of climate change, namely from costs associated with extreme weather and indirect effects on labour, capital, land and natural productivity.