What Japan’s election means for Mitsubishi’s share price

The Mitsubishi share price [5820.T] has surged since Taro Kono (pictured) emerged as one of the front runners to succeed Japan’s outgoing prime minister Yoshihide Suga. The stock alongside Renova [6503.T] and Tess Engineering’s [5074.T] are among the companies at the forefront of Japan’s renewable energy drive, which could benefit under a Kono administration.

Yet, there is concern that a Kono government would mean a move away from nuclear as an option to get to net-zero carbon emissions.

Kono is currently in charge of Japan’s COVID-19 vaccination programme and is known for opposing nuclear power and favouring renewables. Described as a “​​straight-talking, social media-savvy minister” by The Guardian, Kono was a former foreign defence minister under Shinzo Abe. At 58 years of age, Kono is the youngest candidate and has appeal among younger voters.

 

What’s happening with Mitsubishi, Renova and Tess’s share prices?

Mitsubishi’s share price has gained over 33% since 2 September. Renova’s share price is up almost 50% since 2 September, while Tess Engineering’s share price is up 30% in the same period.

All of these companies should benefit from Japan’s shift to renewables. According to a Financial Times special report, the mooted energy mix for 2030 means increasing dependency on renewables from the current 17% to between 50% and 60% – a lofty target, but one that could drive heavy inflows into green energy shares.

  

Tess Engineering specialises in using environmentally friendly solutions to save energy with business lines, including the installation of solar power generation systems. Renova is involved in the operation and development of renewable power plants.

Mitsubishi – perhaps the best-known name outside of Japan – has stated that it will increase the share of renewable energy sources in its power business from 30% to 60% by 2030, bringing it into line with the government’s ambitious emission targets. Late August, the Japanese trading house announced it had achieved a 36% reduction from 2001 levels of greenhouse emissions, beating its original 30% reduction target as part of its Environmental Vision 2021 initiative.

 

How will this affect Japan’s green ambitions?

Outgoing prime minister Suga had already used the need to move away from fossil fuels to draw a line between himself and his predecessor, Shinzo Abe. In his first address to parliament, Suga declared that Japan would achieve net-carbon emissions by 2050. That was followed this year by stating that Japan would cut emissions by 46% by 2040, compared to what they had been in 2013. The message was clear: after years of indifference, Tokyo was getting serious about climate change.

  

To get there would mean breaking Japan’s dependency on fossil fuels and potentially increasing its use of nuclear power in a country that has been slow to restart reactors after the Fukushima disaster in 2011. The FT special report expects Japan’s electricity mix to be between 30% to 40% nuclear and fossil fuels by 2030.

In the past, Kono has made comments about phasing out Japan’s nuclear plants, which has led to worries from investors. Perhaps sensing that that position might not work if Japan was to meet its emission goals, last week Kono said that restarting Japan’s nuclear power plants was needed to get to net zero.

This sent Japanese utility stocks higher. Tokyo Electric Power Co. [9501.T] surged over 12%, while Kansai Electric Power Co. [9503.T] gained more than 5% on the announcement.