Platts Jet Fuel

A closer look at Platts jet fuel coverage

Japan bolsters loan insurance for LNG, critical minerals purchase, hydrogen supply chains

Japan will bolster providing its loan insurance in areas including companies procuring LNG and critical minerals, as well as for developing hydrogen supply chains from July 1, Minister of Economy, Trade and Industry Yasutoshi Nishimura said June 2.

The move comes as part of Japan's efforts to enhance its supply chains of critical commodities and materials including natural gas and critical minerals and accelerate its decarbonization.

Under an amendment in its ministerial ordinance promulgated June 2, METI will allow the state-owned Nippon Export and Investment Insurance to expand its coverage of loan insurance from July 1 to finance receiving from Japanese financial institutions for Japanese companies' businesses abroad.

Specifically, NEXI will start providing products from July 1 covering risks in such areas as bolstering supply chains, which was recognized as among key priorities at the recent G7, as well as in the country's drive toward decarbonization and helping out start-ups' businesses abroad, Nishimura said.

"In particular, we expect [the loan insurance] to be used for procurements of such resources as critical minerals and LNG, as well as for developing hydrogen supply chains in Asia and other related overseas businesses," Nishimura told a press conference.

Speaking at a press briefing, Kei Kawahara, director of METI's trade and finance division, said that this amendment in the ministerial ordinance would help Japanese companies smoothly secure the finance needed for fortifying supply chains and decarbonization.

"In addition to procurement, this [framework] would be able to be used for equity investment for acquiring stakes abroad in LNG and critical minerals," said Kawahara, adding that it will be used for providing the loan finance for when Japanese companies are receiving loan from financial institutions in the country.

"As for decarbonization, NEXI would provide loan insurance, for instance, for developing hydrogen chains in Asia as well as for [Japanese companies] securing loan for capitals needed for investment in SAF [sustainable aviation fuel] projects in Asia," Kawahara added.

The Russian invasion of Ukraine was a wake-up call for governments to shore up supply chains of strategic commodities and materials, with Japan designating supply chains of natural gas, critical minerals, semiconductors and storage batteries as "critical materials" for its economic security.

G7 move

The latest move by Japan comes as the G7 adopted April 16 the "Five-Point Plan for Critical Minerals Security" at its Sapporo climate and energy ministerial meeting.

The plan called for developing a "plausible forecast" of medium and long-term supply and demand for critical minerals; developing resources and supply chains responsibly; recycling more and sharing capabilities; saving resources through innovations; and preparing for supply disruptions.

G7 countries have pledged $13 billion in fiscal support for domestic and international critical mineral projects aimed at promoting private sector investment on the premise of high environmental, social and governance standards, according to the Five-Point Plan for Critical Minerals Security.

"As for Japan, we have secured more than Yen 200 billion ($1.4 billion) fiscal supports for upstream to midstream developments," Ryo Minami, deputy commissioner for international affairs, and director-general for international policy on carbon neutrality at the METI's Agency of Natural Resources and Energy, told S&P Global Commodity Insights May 26.

Minami said that this is Japan's first budget of its kind and the largest supplementary budget earmarked for mineral resources focused on critical minerals, adding that it will be used for equity investment and feasibility studies for mineral resources projects.

Japan will boost critical mineral resources development together with the G7 and other "like-minded countries" as part of its efforts to bolster its economic security, he said.

Demand is expected to soar for lithium, nickel, cobalt and other metals needed for batteries and electrification technologies. Supply chains to bring the commodities to market face numerous challenges, and refining capacity is heavily concentrated in a few countries.

"We believe an increase in dependency on specific countries [for critical minerals] would aggravate vulnerability for the economic security. We also see moves for resource nationalism in some countries pose risk for a resource importing country like Japan," said Minami, adding that this was why it was important to work with countries facing similar situations and sharing common values of market-driven critical minerals trades.