Tokyo, 12 August 2026 – first published by JACSES – A report jointly published by SOMPO Institute Plus and Japan Youth Council in 2026 uses concrete data to demonstrate that Japan’s continued reliance on fossil fuels poses significant risks to the economy and people’s livelihoods. The publication reflects an understanding of steps required to deliver a clean energy transition, which is running in conflict with some of SOMPO’s current underwriting positions.
Estimating the impact of soaring fossil fuel prices on the Japanese economy, the report shows if crude oil prices remain 20% higher for five years, the cumulative effect would reduce GDP by approximately 6.8 trillion yen. In turn, if crude oil supply were to decrease by 50%, economic losses could amount to approximately 11.9 trillion yen. A key concern highlighted is that this dependence on price-volatile fossil fuels carries the risk of widening social inequality. The proportion of household income spent on utility bills is higher for low-income households, meaning that rising energy prices will have a greater impact on their household budgets.
At a less than 20% energy self-sufficiency rate, Japan relies on foreign sources for the majority of its energy, importing most of its oil, LNG, and coal from abroad. In particular, Japan depends on the Middle East for more than 90 percent of its crude oil. This makes it highly vulnerable to international developments in areas such as the Strait of Hormuz.
With this in mind, the report further shows that we have entered an era in which the transition away from fossil fuels is a key factor in global competitiveness. Globally, the cost of renewable energy continues to decline, and the EU has introduced systems, such as the Carbon Border Adjustment Mechanism (CBAM), that impose additional costs on products with high carbon emissions. If Japanese companies continue to rely on fossil fuels, the risks of a decline in export competitiveness, rising energy costs, and a disadvantageous position in international markets will increase.
Also, the report emphasises a structural shift aimed at reducing dependence on fossil fuels themselves, rather than a symptomatic approach of “providing subsidies when prices rise. Expansion of renewable energy sources such as solar and wind power and the use of non-fossil fuel power sources is considered a practical means of increasing resilience against price spikes and supply disruptions.
Since SOMPO, the parent company of the SOMPO Institute Plus, has yet to establish a policy to halt underwriting new fossil fuel projects, and given that human rights issues have arisen in projects such as the Rio Grande and Calcasieu Pass 2 LNG projects, SOMPO itself must change its behavior in order to mitigate the risks identified in the report.
