Berlin / Tokyo With half his cabinet, Olaf Scholz (SPD) is leaving for a weekend trip to Tokyo on Friday. With six cabinet colleagues in tow, the Chancellor is traveling to the first German-Japanese intergovernmental consultations.
In addition to the Ukraine war, the meeting also dealt with the topic of economic security. And there, Scholz thinks, Germany could learn a few things from Japan.
When it comes to securing raw materials, Japan has “been pursuing a strategic approach for a long time,” said the Chancellor in an interview with the Handelsblatt. “I’m convinced we can learn a lot from this.” But the Japanese system has grown over a long time – and is therefore difficult to transfer.
In Japan, the energy supply is secured in close cooperation between the state and private companies (public-private partnership). There are several companies, government organizations, and government and semi-government financial institutions in the East Asian island kingdom that specialize in financing, exploring, and developing energy and other resource sources.
Officially, the authorities have the say, says Seijiro Takeshita, a professor at Shizuoka University. “But mostly it’s private companies, Japan’s trading houses, that do the actual work.”
Their importance is so great that even the Ministry of Foreign Affairs draws on the expertise of the trading houses, explains Takeshita. “They understand the developments in many countries better because they also implement large projects with the governments there.”
Japan relies on the hydrogen economy for energy
Takeshita sees Japan’s energy sector as a prime example of the division of labor between the state and the private sector. The Ministry of Economy, Trade and Industry regulates the area in particular through the Japan Oil, Gas and Metals National Corporation (Jogmec).
This de facto authority is active in all major areas of energy and metals strategy: oil and gas exploration, coal, carbon capture, storage and utilization, hydrogen and ammonia, management of rare earth metal stocks, wind power and geothermal energy.
In the energy sector, Japan, like Germany, relies on the hydrogen economy. In order to promote their spread, the government wants to primarily obtain the hydrogen from fossil fuels and separate, store or reuse the resulting carbon dioxide from the exhaust gases. Here too, according to Takeshita, the Japanese government is trying to “get a lot of people from the private sector on board”.
One reason for the concerted national approach in Japan is Japan’s almost complete dependence on energy imports. After the outbreak of war, securing raw materials became a key issue for the federal government.
>> Read here: Japan is developing the first international hydrogen supply chains – and is relying on ammonia as an alternative
Scholz wants to learn lessons from the past and not become dependent on another country again, as was the case with Russian energy imports. That’s why he wants to make Germany more independent of China in the supply of raw materials.
Japan could play an important role in this desired diversification. Scholz had already set an example with his first visit to Tokyo last April. He had consciously traveled to Japan first and not to China. Unlike China, Japan condemned the Russian war of aggression and joined in sanctions against Russia.
The chancellor had set an example with his trip.
(Photo: IMAGO/ZUMA Wire)
Transferring the Japanese approach to raw material security to Germany would, however, be difficult. Because the privatization of raw material procurement there has grown historically: Since the industrial race to catch up with the West began in the 19th century, large conglomerates have been driving the country’s development forward.
>> Read here: Can Germany still manage the energy transition?
The core of these company associations, which were broken up after the Second World War, was usually not just a bank, but also a trading house. For Jefferies analyst Thanh Ha Pham, such an association is “like a mastermind with many arms that can piece together complex projects.”
About half a dozen major companies survived. Most prominent are the five retail giants Mitsubishi Corp, Sumitomo, Itochu, Mitsui, Sojitz and some younger companies.
Federal government wants to make Germany resilient
One is Toyota Tsusho, the trading house of the loosely structured Toyota Group. For example, it handles car sales in Africa for Toyota and ensures the lithium supply for the electric car batteries of the world’s largest car manufacturer.
>> Read here: How the German economy wants to strengthen domestic raw material extraction
In addition to the historical development, Pham cites another reason why the government is turning to the private sector when it comes to energy security. “The government assumes that private companies are likely to use resources more efficiently than a large state-owned company,” says the expert.
Scholz obviously has a similar approach in mind. In an interview with the Handelsblatt, the Chancellor said that the aim of the federal government’s new raw materials strategy was “that the extraction of raw materials remains a private business, but at the same time the companies act so cleverly that our economy is sufficiently resilient”.
In Japan, the strategic interests of the state and companies coincide, as analyst Pham explains. For companies, it would be about increasing security by diversifying their business. “The trading houses weigh very carefully which projects make economic sense and which do not.” Because the financial risks are high.
Japan’s raw material security model also has disadvantages
Energy projects in particular require long lead times and a lot of capital. That is why the trading houses have built up a lot of know-how in project planning and financing. “They conclude long-term supply contracts even before construction begins, thereby reducing the risk,” explains the financial analyst.
At the same time, the trading houses ensure that Japan has technically strong companies for securing raw materials. An example of this is the trading house Mitsubishi. It bought the ailing mechanical engineering group Chiyoda, the world’s leading manufacturer of liquid gas production plants and terminals.
However, the close cooperation also has negative sides – a certain clique and sluggish competition. In the competition for energy projects, the state-private alliance is an advantage.
Japan’s companies are strong in the raw materials and energy sectors.
(Photo: dpa)
The trading houses are now applying their expertise in oil, gas, coal and metals to renewable energies. They are investing in rows in hydrogen and ammonia projects along with supply chains.
The power company RWE shows how German companies can benefit from this. Together with Mitsubishi and the Japanese-Korean group Lotte, the company is examining the construction of an ammonia factory in the US state of Texas.
However, how successful the Japanese public-private partnership works is also a question of perspective. As early as the 1980s, economics professor Takeshita said there were great concerns about becoming too dependent on oil from the Gulf region. But since then the dependency has grown even greater.
For example, Japan relied on nuclear power for a long time to secure its power supply and reduce carbon dioxide emissions. The 2011 Fukushima nuclear disaster destroyed this strategy.
The fact that Scholz’ officials are taking a close look at the Japanese approach despite everything is also because Scholz not only wants to write down a strategy, but also wants to create clear responsibilities in raw material management. And here, cooperation between the private sector and the state, as in Japan, is an interesting option for him.
More: Market-ready energy technology – How Germany can benefit from the hydrogen pioneer Japan