Japan

Yes.

The amended Cabinet Office Order on Disclosure of Corporate Affairs under the Financial Instruments and Exchange Act of Japan (Disclosure Order), which became effective in January 2023, sets out mandatory “sustainability” disclosure requirements to be reported in a securities registration statement filed by Japanese or overseas companies that conduct an offering of securities in Japan, or an annual securities report filed by Japanese or overseas companies that are obligated to make such a filing (i.e., companies which are listed in Japan or have filed a securities registration statement without being listed in Japan).

According to the Financial Services Agency of Japan (FSA), information relating to the environment, society, employees, human rights, anti-corruption, anti-bribery, governance, cybersecurity and data security may fall within the scope of “sustainability” mandatory disclosures.

The Corporate Governance Code published by the Tokyo Stock Exchange (Corporate Governance Code) also sets out general sustainability disclosure requirements for all companies listed on the Tokyo Stock Exchange. In particular, companies listed on the Prime Market are expected to collect and analyse the necessary data on the impact of climate change-related risks and earning opportunities on their business activities and profits, and to enhance the quality and quantity of disclosure.

In March 2025, the Sustainability Standards Board of Japan (SSBJ) issued inaugural sustainability disclosure standards (SSBJ Standards) to be applied to larger Prime Market-listed companies in phases, representing a significant enhancement to sustainability reporting requirements for such companies.

The SSBJ Standards comprise:

1. the universal sustainability disclosure standards (Application of the Sustainability Disclosure Standards);
2. the theme-based sustainability disclosure standards No. 1 (General Disclosures); and
3. the theme-based sustainability disclosure standards No. 2 (Climate-related Disclosures).

The SSBJ Standards incorporate all requirements under IFRS S1 and IFRS S2, but with jurisdiction-specific alternatives which a reporting entity can choose to apply when considered necessary. If a company chooses not to apply any of the jurisdiction-specific alternatives, its disclosures will be in compliance with the ISSB Standards. On the other hand, if a company chooses to apply the jurisdiction-specific alternatives, the disclosures may or may not result in compliance with the ISSB Standards. The SSBJ Standards also contain certain requirements which are not included in the ISSB Standards. However, it is intended that companies preparing disclosures for these additional requirements under the SSBJ Standards would not be required to obtain additional information beyond the information obtained in the process of preparing disclosures in accordance with IFRS S1 and IFRS S2. The SSBJ has prepared a schedule of differences between the ISSB Standards and the SSBJ Standards.

Pursuant to the Disclosure Order and relevant ordinances amended in March 2026, the SSBJ Standards shall apply to the mandatory sustainability-related disclosures in annual securities reports filed by companies listed on the Prime Market of the Tokyo Stock Exchange from:

1. for companies with a market capitalisation of JPY3 trillion or more, the fiscal year ending 31 March 2027;
2. for companies with a market capitalisation of JPY1 trillion or more, the fiscal year ending 31 March 2028; and
3. for companies with a market capitalisation of JPY500 billion or more, the fiscal year ending 31 March 2029.

Application of the SSBJ Standards to Prime Market-listed companies with a market capitalisation of less than JPY500 billion is still under consideration by the FSA.

Companies that are not subject to the SSBJ Standards will continue to be required to provide sustainability-related disclosures pursuant to the requirements that came into effect in January 2023 as described above.

The Disclosure Order contains mandatory disclosures in relation to sustainability, including environmental, social and governance aspects.

ESG disclosures under the Corporate Governance Code are on a comply-or-explain basis.

In an annual securities report, all sustainability issues including environmental, social and governance aspects are covered. In line with the ISSB Standards, the SSBJ Standards cover sustainability-related (and not just climate-related) disclosures.

In a corporate governance report, the focus is mostly on environmental aspects.

While the Disclosure Order does not specify any framework for the purpose of disclosure in an annual securities report, it stipulates that sustainability information must be described from the viewpoint of the four core elements of the TCFD Recommendations: governance, strategy, risk management, and metrics and targets.

Environment-related disclosures in a corporate governance report are expected to be in line with the TCFD Recommendations or an equivalent disclosure framework.

The SSBJ and the ISSB have confirmed that the SSBJ Standards are designed to achieve outcomes that are functionally aligned with the ISSB Standards, and the SSBJ remains committed to maintaining this functional alignment. This commitment is reflected in the amendments to the SSBJ Standards issued in March 2026, which prescribed corresponding changes to the SSBJ Standards in response to the IFRS S2 December 2025 Amendments.

While neither the Disclosure Order nor the Corporate Governance Code expressly adopts a single or double materiality approach, the Principles Regarding Disclosure of Non-Financial Information issued by the FSA mentions that materiality should be determined by each company taking into consideration various factors, including their category of business, business environment and enterprise value.

Companies not subject to the SSBJ Standards are not required to report their GHG emissions in their annual securities report or corporate governance report. However, a company that considers climate change to be a material risk must state its metrics and targets for climate change in its annual securities report, which often includes information about GHG emissions of the company.

Reporting companies subject to the SSBJ standards must disclose GHG emissions, categorised as Scope 1, 2 or 3. SSBJ has issued practical guidance to support reporting companies who report under the existing Japanese GHG reporting system on how they can also comply with the SSBJ Standards.

Separately, under the Act on Promotion of Global Warming Countermeasures of Japan, a company that (a) emits a certain amount of GHG from all of its business facilities in Japan within a year, or (b) transports a certain amount of freight in Japan within a year by itself or with the assistance of carriers, is required to calculate and disclose the amount of GHG emissions from the company’s business facilities in Japan (i.e., Scope 1 and 2) in its report to be filed with the relevant governmental authority in accordance with the instructions published by the Ministry of Environment of Japan. Such reported data can be accessed by the public.

This is currently not mandatory. A report of the working group regarding the disclosure and independent assurance of sustainability-related information published in January 2026 suggests that independent assurance will become mandatory in phases from the fiscal year ending 31 March 2028 (depending on the market capitalisation of the reporting company) for companies listed on the Prime Market of the Tokyo Stock Exchange. Discussions are currently underway regarding the requirements for independent assurance providers and related matters.   

It is uncommon for a company which is not subject to the ESG disclosure obligation under the Disclosure Order or the Corporate Governance Code to voluntarily make substantial ESG disclosures.

No, and regulators have not indicated any plans to develop a local taxonomy.

Making disclosures in line with the TNFD framework is expected to be examined by the SSBJ, taking into consideration international discussions. The SSBJ has not indicated a specific timeframe for this.

In response to discussions within the Sustainability Disclosure and Assurance Working Group of the Financial System Council of Japan, further consideration is being given to introducing a safe harbour rule for forward-looking statements, including ESG-related disclosures, provided in an annual securities report of a company. 

Yes. The Act on Promotion of Global Warming Countermeasures sets net zero by 2050 as a basic principle. Under the Plan for Global Warming Countermeasures established by the government pursuant to this act, targets are set to reduce Japan’s GHG emissions by 46% by 2030, 60% by 2035, and 73% by 2040, compared to 2013 levels.

Under the revised GX Promotion Act enacted in 2025, Japan transitioned from a voluntary to a mandatory emissions trading system (GX-ETS), which has been fully operational since the fiscal year ending 31 March 2027. Operators with average annual direct CO₂ emissions of 100,000 tonnes or more (irrespective of sector) are subject to this system. The GX-ETS is expected to cover 300 to 400 companies and represent almost 60% of total GHG emissions in Japan.

Emission allowances will be allocated free of charge, with the first allocation scheduled for November 2027, after which trading will commence. A financial penalty will apply to emitters who exceed their total emission allowances. From the fiscal year ending 31 March 2034, paid auctions will be introduced for power generators.

A fossil fuel surcharge on imported and domestically produced fossil fuels is expected to commence in FY2028.

Under the GX Promotion Act, entities subject to the GX-ETS are required to submit a transition plan to the Minister of Economy, Trade and Industry each fiscal year. The transition plan must include targets for reducing CO₂ emissions associated with their business activities, as well as plans for investments and other business activities that contribute to a smooth transition. The transition plans are published by the Minister of Economy, Trade and Industry, while the targets for the fiscal year ending 31 March 2027 to the fiscal year ending 31 March 2030 and investment plans will be redacted. There are no consequences for failing to meet the targets under the transition plan.

As discussed above, the SSBJ Standards will apply to companies listed on the Prime Market of the Tokyo Stock Exchange. A company subject to those standards shall disclose in its annual securities report details of its climate-related transition plans, such as any major assumptions and essential factors and conditions underlying those plans (if the company has such plans).  

Projections of CO₂ reduction targets for each fiscal year from the fiscal year ending 31 March 2027 to the fiscal year ending 31 March 2031 must be stated in the transition plans submitted by entities subject to the GX-ETS as described above. Of these, only targets for the fiscal year ending 31 March 2031 are published by the Minister of Economy, Trade and Industry.

The Disclosure Order provides that, if (and only if) companies regard climate change as a material risk to themselves, such companies must set climate-related targets, such as GHG emissions targets, and state them in their annual securities reports.

Save for the above, companies are not generally required to set or meet climate-related targets.

In line with the ISSB Standards, the SSBJ Standards require reporting companies to disclose certain details on any climate-related targets they may have set.

Japan has an EPR scheme for producers of certain containers, packaging and home electrical appliances, who are required to pay recycling fees to recyclers.

Under the revised Act on Promotion of Effective Utilization of Resources, businesses that produce or sell above a certain threshold of products designated by the government as having a high need to use recycled resources as raw materials are required to formulate plans and submit periodic reports regarding their targets for the use of recycled resources.

While there are no mandatory eco-design requirements, eco-design is being promoted through measures such as consideration in government procurement.

There are no mandatory corporate sustainability due diligence requirements, and there are currently no concrete moves towards introducing such requirements. Businesses are encouraged to conduct human rights due diligence and provide access to remedies under the Ministry of Economy, Trade and Industry’s Guidelines on Respect for Human Rights in Responsible Supply Chains issued in 2022. 

For green finance, the Ministry of the Environment has published the “Green List” as a reference material, but this is not a taxonomy and is intended only as illustrative examples for reference purposes. For transition finance, the Ministry of Economy, Trade and Industry has developed Basic Guidelines and sector-specific roadmaps, which were recently updated. These remain guidelines rather than laws and are referenced when raising labelled finance.

In addition, the Japanese government has set a target of JPY150 trillion in green transformation (GX) investment over the next 10 years, comprising JPY20 trillion from the government and JPY130 trillion from the private sector. The government’s JPY20 trillion portion is funded through the issuance of Climate Transition Bonds, a type of government bond, which supports GX/transition investment through subsidies and blended finance provided via the GX Acceleration Agency, a quasi-governmental body.

The most significant mandatory regime is the GX-ETS described above. Detailed trading rules are scheduled to be designed before trading commences in November 2027.

The government is formulating a public-private investment roadmap for strategic sectors requiring priority investment by the fiscal year ending 31 March 2041, with “Resource and Energy Security / GX” being one of the strategic sectors. Specifically, public-private investment targets will be set for next-generation solar cells, hydrogen, green steel, next-generation geothermal, offshore wind, next-generation innovative reactors, GX chemicals, and fusion energy.

There are currently no plans to introduce mandatory regulations on transition plans (save for the transition plan requirement for entities covered by the GX-ETS), corporate due diligence, or nature-related matters, and these are expected to continue on a principle/guideline basis.

No.

No, but in the “Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc.” issued by the FSA, there is a section titled “Appropriateness of Business Operations Related to Investment Trust Management Business, etc.”, under which a sub-section titled “Points of Attention with respect to consideration of ESG” refers to the fact that, where an investment trust does not fall under the category of ESG investment trust, the FSA will monitor to make sure the name or nickname of the investment trust excludes ESG-related terms such as ESG, SDGs (Sustainable Development Goals), green, decarbonisation, impact, sustainable, and other similar words in order to avoid misleading investors. 

In addition, the Ministry of the Environment revised its “Guidelines for Environmental Representations” in March 2026, marking the first revision in 13 years. The revisions were made in light of international developments in addressing greenwashing. The Guidelines provide that, as a general principle, self-declared environmental claims made by business operators should conform to internationally recognised standards, such as ISO / JIS Q 14021.

Likely grounds include:

1. disclosure liabilities under securities laws and regulations, e.g. providing materially false or misleading information in listing documents or other corporate disclosure documents, such as annual securities reports or securities registration statements;
2. breach of directors’ duties; and
3. claims in tort for misrepresentation.

There are also risks of regulatory enforcement pursuant to, for example, codes / guidance issued by financial regulators on the marketing of financial products and applicable stock exchange requirements on ESG disclosures.