According to foreign media reports, Japan will double the subsidies for electric car purchases to up to 800,000 yen ($7,000), almost the same as those in the United States and Europe and provide subsidies for charging infrastructure.

The Japanese government plans to allocate 37.5 billion yen ($329 million) for subsidies in the supplementary budget for fiscal 2021, of which 25 billion yen will go to environmentally friendly vehicles, with subsidies for electric vehicles rising to a maximum of 800,000 days Yuan. The subsidy scheme will also cover plug-in hybrids and fuel cell vehicles, while other hybrids remain excluded.

Japan's government hopes to speed up the country's adoption of electric vehicles as global pressure mounts to ditch fossil fuels. In 2020, EV sales in Japan accounted for less than 1% of total passenger car sales. The Japanese government's goal is to make all new passenger cars sold in Japan environmentally friendly by 2035, but that goal also includes hybrids. Hybrids are still popular at a time when electric vehicle sales are sluggish. Only 15,000 BEVs were sold in Japan last year, so the 25-billion-yen subsidy program will include BEVs.

Fuel cell vehicles can receive subsidies of up to 2.5 million yen, and gas-fueled vehicles of the same size and different prices will also be considered. For example, subsidies for Toyota's hydrogen fuel cell vehicle Mirai will be raised to 1.4 million yen from the current 1.15 million yen. The Japanese government will also allocate 6 billion yen for new hydrogen refueling stations.

Japan's limited charging infrastructure limits the adoption of electric vehicles. At the end of fiscal 2020, Japan had 2.3 charging points per 10,000 people, while France had 6.9. Japan will allocate about 6.5 billion yen from the new supplementary budget for the construction of charging infrastructure, although it can only add a few thousand charging points at most. However, Japan aims to expand its charging network from the current 30,000 to 150,000 by 2030.

The scale of Japan’s new subsidy program is like those offered by Germany, France, Italy, the United States and South Korea. Some countries are using such measures to help their economies recover from the Covid-19 recession. If the Japanese government sees a need to further accelerate electrification, it may consider investing more.