The Green Investment Paradox in Japan: Growth, Energy, and Financial Realities

Abstract

This study examines the concept of "green finance," a cornerstone of sustainable development, in the context of the Japanese economy, exploring its empirical and theoretical dimensions. The relationship between renewable energy consumption (RENE), GDP per capita, and foreign direct investment (FDI) inflows was econometrically tested using data from Japan for the period 1990-2024. ADF unit root tests applied within the econometric analysis framework showed that the variables were not stationary at their level values but became stationary (I(1)) after taking their first differences. The results of the "Bootstrap ARDL Bound Test" applied subsequently confirmed the existence of a long-term cointegration relationship between the variables. Japan has announced its Green Growth Strategy in line with its goal of becoming carbon neutral by 2050, and has become the second-largest green bond issuer in Asia. However, the analysis reveals that there are still significant gaps between goals and practices. Specifically, the increasing dependence on fossil fuels after nuclear energy, the slowness in investment and implementation processes, and the risks of "greenwashing" in ESG investments have been identified as the main challenges. Therefore, to achieve Japan's climate goals, incentives need to be increased, data transparency needs to be ensured, and financial institutions need to more decisively transform their fossil fuel portfolios..Key Words: Green Finance, Renewable Energy, Cointegration Analysis, Sustainable GrowthJEL Classification: C32, G11, O44, Q43