Impact Policy Tracker Policy

Japan Climate Transition Bond



In the context of Japan's Green Transformation (GX) programme, aiming to mobilise USD 1 trillion over the next decade in support of advanced sustainable technologies, the Government of Japan issued a USD 11 billion Climate Transition Bond, the first of its kind issued by a sovereign. The bond’s proceeds are set to finance projects across 22 sectors, including hydrogen, next-generation solar cells, and energy-efficient industrial equipment, in line with Japan’s ambition to achieve carbon neutrality by 2050.

Highlights

  • First of its kind by a sovereign: Japan has been the first country to issue a Transition Bond, serving as a global exemplar of best practice. This is particularly significant given that around half of CO₂ emissions cannot be reduced with existing technologies alone, according to the International Energy Agency. In this context, innovation support through sovereign bonds is critical as leveraging national credit can help address challenges and risks that may not be fully manageable by private sector actors alone.

  • Fully compliant with international standards: on top of its local Transition Bond Framework, the bond is fully aligned with ICMA’s Green Bonds Principles and Climate Transition Finance Handbook. The bond includes a diverse range of categories, from subsidy programmes that support decarbonisation objectives (45% of proceeds) to catalysing research and development (R&D) of technologies. that will support industrial and energy transition in line with emission reduction targets (55% of proceeds).

Government’s Role:
Market Participant


Country:
Japan

Policy Type:
Sustainable Bonds

Year: 2024

Responsible Institution:
Cabinet Secretariat, Financial Services Agency, Ministry of Finance, Ministry of Economy, Trade and Industry, Ministry of the Environment

Additional information:
Government of Japan: Climate Transition Bonds Show Japan’s Commitment to Carbon Neutrality
Climate Bonds (2024): “Japan's Climate Transition Bond”
Japan Climate Transition Bond Framework
Ministry of Economy, Trade and Industry: Transition Finance

Sustainable Bonds

What are Sustainable Bonds?

Within the set of financial instruments that fall under the impact investing umbrella, Green, Social, Sustainability, Transition, Blue, Gender and Sustainability-Linked bonds (often collectively referred to as GSS+, ESG, thematic, labelled or sustainable bonds) have gained prominence in recent years for their potential to help bridge the SDG financing gap. Governments, especially in emerging economies, play a catalytic and pivotal role in scaling these instruments. By issuing sustainable bonds, national, regional, and local public entities mobilise capital for long-term investments with broad social and economic benefits, which often fall outside the scope of conventional, profit-driven financing.

Public issuers are not only large players in terms of volume, representing approximately 50% of sustainable bond issuances annually since 2020, but also critical market enablers. Government-led issuances serve as signals of policy commitment to sustainability, helping to build investor confidence and drive demand from both domestic and international capital markets. Moreover, public sector issuances typically align with international standards and best practices, such as the ICMA principles, thereby setting a benchmark for transparency, impact reporting, and accountability. This leadership lowers the perceived risk for other issuers and facilitates replication by subnational governments, state-owned enterprises, and even private entities. Thanks in part to these public sector efforts, the sustainable bond market continues to grow rapidly. In 2025, issuance of sustainable bonds is projected to reach USD 1 trillion, accounting for 11% of the global bond market, a milestone that reflects both rising investor appetite and the enabling role played by governments in expanding this segment of sustainable finance.

For more information on sustainable bonds and their market trends, visit S&P Ratings “Sustainable Bond Outlook 2025”, Sustainable Fitch “Sustainable Finance Outlook 2025”