Regulatory reform of energy and economic growth in Japan

Deregulation of the electric power business began in the middle of the 1990s in Japan, and after several law revisions, the electric power market was fully liberalized in April 2016. On the other hand, the Japanese government has also adopted the FIT system, which gives incentives for introducing renewable energy power, as a means for reducing greenhouse gas emissions in 2012. In this paper, we take up regulatory changes involving deregulation and global warming countermeasures, analyze the facts and impact, identify the problems that appear as side effects, and consider the impact on economic growth. The conclusion obtained is as follows. Deregulation has certainly stimulated the power market and has provided new entrants, new price menus and value-added services. Especially in the latter half of the 1990s and early 2000s, electricity prices declined, and productivity measured by TFP improved. The price cut was due to the reduction of capital costs by the existing dominant electric power companies, although after the Lehman shock in 2008, neither price reduction nor productivity improvement can be confirmed. Meanwhile, the FIT has played a role in expanding renewable energy power. However, it not only raised the cost of electricity but also became a factor impairing the stability of the entire power supply. Japan’s electricity supply system is shifting to a stage where additional measures for stable supply are required. © 2018, Japan Economic Policy Association (JEPA).