Japan’s carbon credit market is undergoing a critical transition, according to a newly released survey by exroad, supported by the Tokyo Stock Exchange.
The report reveals mounting interest from corporations, municipalities, and developers as Japan prepares for GX ETS Phase 2, which begins in 2026. With responses from 283 organizations totaling 362 entries, the survey paints a picture of a market brimming with ambition, but still hindered by uncertainty.
Corporate Demand Concentrates on J-Credit System
The J-credit, the country’s national credit scheme, lies at the heart of Japan’s carbon strategy. As it stands it dwarfs interest in international standards like Verra or Gold Standard, and even its own Joint Crediting Mechanism (JCM). “84% of respondents on the demand side want to purchase J-credits in the future or already have,” says Keisuke Kimura, the founder and CEO of exroad.
When asked about the reason why they prefer J-credits, most buyers cited Scope 1 and 2 compliance, but interest in using credits for carbon-neutral products and services (44%) and advanced technologies like Direct Air Capture (DAC) is rising rapidly.
Global Mechanisms Spark Growing Curiosity
Though the vast majority prefer J-credits, there is still a solid number that have already purchased alternatives or are considering them. The data reveals that 36.1% have chosen JCM and 33.5% overseas credits.
“Some advanced companies have already started to look at PACM—this was unexpected,” says Kimura. Although Article 6.4 credits under the Paris Agreement are not yet accessible for compliance in Japan, 13.3% of respondents showed interest in future uptake.
The government is still debating their inclusion in domestic frameworks, but the momentum is clearly building.
Another sign of the shift towards decarbonization are the bilateral agreements Japan has been working on. A potentially key partner would be India, with the two countries recently announcing they are working on finalizing a joint crediting mechanism that could provide substantial supply.
Relevant: India And Japan Forge Climate Partnership Through Joint Credit Mechanism
Market Outlook: Price Stability Today, Pressure Tomorrow
Based on the survey, exroad projects a conservative 3 million tons of demand annually under GX ETS Phase 2. Yet supply constraints, particularly in J-Credits (currently at ~1 million tons/year), could drive prices upward. Forecasts suggest allowances could jump from $27.6-41.4t-CO2e (¥4,000–6,000/t-CO2e) in 2027 to over $41.5 (¥6,000+) by 2030.
Without a corresponding increase in domestic credit generation, the imbalance between demand and supply may trigger volatility, adding financial pressure to carbon-intensive sectors already facing stricter reduction targets.
Traceability and Trust Now Paramount for Corporates
The largest corporations are leading the charge when it comes to J-credits and exploring other options and quality assurance is emerging as a make-or-break factor for them. Over 56% of buyers cite traceability as their top concern, and interest in high-integrity solutions is fueling demand for carbon removals, even amid market complexity.
This attention to integrity is helping carbon removals—particularly DAC and CCUS—gain traction despite higher costs and limited supply. As more Japanese firms aim to align with international expectations, building trust in the credit supply chain is no longer optional—it is becoming a competitive advantage in the global low-carbon economy.
As Japan’s net-zero ambitions accelerate, the 2025 exroad survey suggests a market hungry for scale—and structure.
