This chapter examines the status and strategic direction of Japan’s maritime sector, focusing on three primary dimensions: market performance in shipbuilding, the resilience of the marine equipment industry, and emerging market trends driven by decarbonisation and digital transformation. It analyses Japan's standing as the world’s third-largest shipbuilding nation and how it maintains competitiveness in high-value-added segments despite structural cost challenges. Furthermore, the chapter explores the strategic integration of the marine equipment industry and evaluates the impact of government-led green initiatives, such as the Green Innovation Fund, alongside the critical challenges of labour shortages and shifting innovation leadership in the global landscape.
Peer Review of the Japanese Shipbuilding Industry 2026
Abstract
Global shipbuilding completions and orders rebounded modestly in the early 2020s after a mid-2010s trough but stayed well below the 2008–2011 peak. The recovery was driven by post-COVID demand, logistics improvements, and environmental regulation which accelerates ship replacement.
Japan’s share in global ship completions and orders has gradually declined, yet the country retains a significant position in advanced vessel segments, particularly those requiring high regulatory compliance or specialised technical capabilities.
In terms of compensated gross tons (CGT)-based completions, Japan accounted for approximately 11% of the global total in 2024, maintaining its position as the third-largest shipbuilding nation after China and Korea. Although this share is below historical levels, Japanese shipbuilders maintain stable capacity utilisation due to sustained domestic demand and orders from quality-focused international shipowners.
Japan’s shipbuilders continue to face structural cost disadvantages, primarily due to higher labour expenses, land prices, and energy costs relative to China and Korea. Additionally, the strong yen in earlier periods further undermined export price competitiveness, although recent depreciation of the Japanese Yen (JPY) has provided some relief.
Japan remains competitive in high-value-added vessels by offering strong engineering capacity, quality control, and delivery reliability. Its shipyards are trusted for complex orders where compliance and lifecycle performance matter more than cost.
1.1.1. Orderbook
Japan remains one of the world’s three leading shipbuilding nations, alongside China and Korea. Its shipyards maintain a stable orderbook supported by sustained demand for technologically advanced and environmentally compliant vessels.
Figure 1.1 traces the evolution of the global shipbuilding orderbook, with reference to Japan’s relative market share and strategic positioning. In the mid-2000s, the global orderbook reached an all-time high, driven by sustained global economic expansion, China's accelerated industrialisation, and increased seaborne trade. During this period, Japan held a considerable share of the orderbook, supported by international demand for its high-quality bulk carriers and tankers.
The 2008 global financial crisis marked a pivotal downturn for the shipbuilding industry. The collapse in global trade led to widespread cancellations and a sharp decline in new orders. Japan, like other major producers, experienced a significant contraction in order intake. Several mid-sized Japanese yards were forced to restructure, shift to ship repair, or pivot toward offshore and non-commercial sectors. This period also marked the beginning of the gradual erosion of Japan’s global market share, as China leveraged cost advantages and rapid yard expansion to dominate the volume segment. Throughout the 2010s, the global orderbook remained largely stagnant. Japanese builders shifted focus toward high-specification and technologically advanced vessels, such as LNG carriers and energy-efficient ship designs.
In the early 2020s, the orderbook experienced a modest recovery following pandemic-related disruptions. Fiscal and trade stimulus—particularly from e-commerce-driven logistics—revived demand for new tonnage. Concurrently, environmental policy developments, such as the IMO GHG strategy and ESG-linked investment trends, accelerated orders for dual-fuel and alternative fuel-capable ships. Japan responded by reinforcing its position in high-value-added segments. Several yards secured contracts for methanol-ready vessels, and public funding—particularly through the Green Innovation Fund—supported R&D on hydrogen- and ammonia-fuelled designs. Although Japan’s output remained below China and Korea, its technological strengths in clean propulsion and retrofit solutions ensured continued relevance in the evolving market landscape.
1.1.2. Completions
Figure 1.2 presents trends in global shipbuilding completions, measured in compensated gross tons (CGT). The figure also highlights Japan’s relative industrial output and its strategic adaptations in response to evolving market conditions.
Source: (Clarksons Research, 2025[2]).
In the mid-2000s, global completions increased steadily, driven by a surge in new orders between 2003 and 2007 amid strong global economic growth and rising seaborne trade. Japan was the world’s second-largest shipbuilder after South Korea, with completions peaking at approximately 10 million CGT during 2008–2010. Japanese shipyards, particularly Imabari, Mitsubishi, and Tsuneishi, operated at full capacity, supported by strong demand for bulk carriers and tankers from Greece, Germany, and Southeast Asia.
Following the 2008 financial crisis, completions began to deviate from prior trends due to a contraction in trade and restricted access to ship finance. Japan experienced a notable decline in export deliveries. By 2012, completions had declined to around 8.4 million CGT. Unlike China, which responded with domestic stimulus and subsidised credit, Japanese yards avoided price competition and focused on risk mitigation through output adjustments.
From 2013 to 2018, global completions declined further as pre-crisis backlogs were cleared, and new contracting activity remained limited. Oversupply in dry bulk and container ship segments exacerbated pressure on yard utilisation. In Japan, annual completions ranged between 6.8 and 7.2 million CGT, with several mid-sized yards undergoing consolidation or shifting toward offshore and repair markets. Concurrently, Japanese yards became increasingly dependent on domestic owners, as international orders migrated to producers in China and Korea.
By the late 2010s, the rate of decline slowed, and the global market began to stabilise. Regulatory developments—such as the Ballast Water Management Convention (2017) and the IMO’s Energy Efficiency Design Index (EEDI)—generated demand for compliant new-buildings and retrofits. Japan, known for high technical standards and regulatory conformity, leveraged this trend to secure orders for higher-standard vessels. The industry also increased investment in automation, precision manufacturing, and energy-saving technologies.
In the early 2020s, global completions saw a modest rebound following COVID-19-related disruptions. A recovery in trade, particularly in container shipping and logistics, drove the fulfilment of deferred orders. According to Clarksons WFR, Japanese completions totalled approximately 5.5 million CGT in 2021 and 5.0 million CGT in 2022. While these volumes remained below historical peaks, the technological complexity of delivered vessels improved, including LNG-ready bulkers, methanol-capable feeders, and ships equipped with energy-saving technologies (EST).
Figure 1.3 shows how Japan’s shipbuilding portfolio evolved from 2005 to 2024 in response to global trade, regulatory, and technological shifts. In the mid-2000s, over 60% of completions were bulk carriers and crude oil tankers, driven by China’s industrial growth (Gourdon, 2019[3]).
Post-2008, Japan’s orders declined sharply. In response, shipbuilders diversified into technologically advanced and environmentally compliant vessels, supported by government policy. During the 2010s, production shifted toward feeder containerships, PCCs, Ro-Ro ships, and LNG carriers, reflecting changes in logistics and demand for complex ship types.
In the early 2020s, Japan prioritised next-generation ships—LNG-fuelled, methanol-ready, and hybrid-propulsion vessels. From 2020 to 2023, over 35% of completions featured alternative fuels or energy-saving tech. Japan retained a niche in high-tech, environmentally specialised vessels through ongoing investment in automation, modular propulsion, and compliance-driven design.
1.1.3. Capacity
To calculate Japanese shipbuilding capacity, the Shipbuilding Committee Secretariat’s “maximum production” approach is used to calculate shipyard capacity (Daniel, 2022[4]). This approach uses data on observed deliveries of yards to calculate capacity, looking at the maximum production over the past 3 or 15 years. The 3-year interval follows closely latest developments in ship deliveries, while the 15-year approach assumed a slower adjustment of yard capacity. For this study, all vessel types are considered.
Figure 1.4 illustrates Japanese shipbuilding capacity from 2000 using a 3-year interval and 15-year interval. For 2024, capacity was estimated at 6.0 million CGT with the 3-year interval and 14.2 million with the 15-year interval.
Source: OECD estimation based on Clarkson Research Services Limited (February 2025), World Fleet Register, https://www.clarksons.net/wfr; S&P Global (February 2025), Maritime IHS database, https://maritime.ihs.com/.
During the 2000s, Japan maintained high-capacity levels, driven by strong global demand and its position as one of the top shipbuilding nations alongside Korea and China. Capacity rose from 6.6 million CGT (3-year interval) and 7.5 million CGT (15-year interval) in 2000 to 11.7 million CGT (+77 %) and 14.0 million CGT (+86 %) respectively by 2010.
Throughout the 2010s, capacity contracted or was reorganised as several yards merged, downsized, or shifted away from commercial newbuilding. The process accelerated after the 2008 financial crisis, mirroring Japan’s declining cost competitiveness relative to Korea and China and an increasing reliance on domestic orders (Gourdon, 2019[3]).
Under the 3-year interval, shipyard capacity was at its highest in 2010 at 11.7 million CGT while it reaches its peak at 15.8 million CGT in 2016 under the 15-year interval. Rising global competition posed a challenge to maintaining this peak capacity.
Rather than expanding yard space, Japanese builders have recently prioritised productivity gains through digitalisation and “smart factory” techniques—for example, greater automation and modular construction—to remain competitive without enlarging their physical footprint.
Source: OECD estimation based on Clarkson Research Services Limited (February 2025), World Fleet Register, https://www.clarksons.net/wfr; S&P Global (February 2025), Maritime IHS database, https://maritime.ihs.com/.
Historically, Japan’s shipyard capacity contributed to a significant amount of total global shipyard capacity, as demonstrated in Figure 1.5. In 2000, its share was 28% (with capacity measured as the maximum production in the last 3 years) and 24% (15-year interval). Japan’s share of global capacity peaked in 2004 at 28.3% under the 3-year interval while it peaked in 2000 under the 15-year interval. The 3-year interval estimation shows a trough in 2012 at 15.5%, Japanese shipyard capacity’s share increased until 2020, where it declined to 11.5%. Under the 15-year interval, Japan’s share similarly declined until 2012, then relatively plateaued at 14-15% until 2021, then declined to 13.1% in 2024.
1.1.4. Labour
Over the past 15 years, shipbuilding employment has varied from 84,510 employees in 2009 to a peak of 90,957 in 2016 to 70,300 in 2023, as demonstrated in Table 1.1. However, it has a relatively consistent ratio to Japan’s total labour force, decreasing to 10% in 2023 from 13% in 2009.
As shown in Figure 1.6, design and research employees and in-house skilled workers consist of approximately 40-50% of total shipbuilding employees. The use of subcontractors has been relatively consistent at around 50% of the total, and since 2015, the use of foreign labour has been recorded, which ranges from 5 to 10% of total shipbuilding employment. The share of design and research employees as part of total shipbuilding employment has been increasing relatively consistently, from 17.3% in 2009 to 20.2% in 2023.
In 2023, the skilled Japanese shipbuilding workers are largely mid-career, with 66.8% of workers being aged 30-49 years, according to Table 1.2. and Figure 1.7. This has been steadily increasing since 2009, peaking in 2023. There is a significantly reduced number of >19 and 20-29 years olds employed in the sector when comparing 2009 (33.3% share) and 2023 (21.9% share), although peaking in 2013 with 37.3% share. The decreasing youth inflow into the industry could be an obstacle to ensuring a continued employment pipeline. The workforce was at its oldest in 2009, with 41.4% of workers over 50 years old, but this has been steadily decreasing, falling to 11.3% in 2023 meaning that currently the sector does not face dynamics of an ageing workforce. To ensure adequate replacement employment, there needs to be increased youth employment in the sector to sustain future retirements.
Note: The table shows the age structure of skilled workers (in-house workers).
Source: Survey by SAJ.
Note: The table shows the age structure of skilled workers (in-house workers).
Source: Survey by SAJ.
Japan has no annual foreign worker quota. The main nationalities employed in the sector are largely from the Philippines, who are 52% of total foreign workers in the sector in 2024, followed by Indonesia (18%), Viet Nam (17%), China (11%) and other nationalities (2%), as shown in Table 1.3. Between 2020 and 2024, the share of Chinese workers declined from 28% to 11%, with Viet Nam and Indonesia increasing their shares.
Note: There is no annual foreign worker quota.
Source: Japan’s questionnaire answer.
1.1.5. Shipbuilding cost
According to Figure 1.8, in all economies, steel prices began to rise in Spring 2020 and soared in 2021-2022. Since then, the peak has passed, and steel prices have been declining in many economies. The steel prices kept falling though most of 2024 but seem to have bottomed out. However, the price is still at a higher level compared to the one before the Covid pandemic. Steel prices in Japan are higher than in other major shipbuilding economies.
Note: Panel a) Local currency basis. Panel b) US dollars basis.
Source: OECD calculations based on Kallanish, Sangyo Press Co., Ltd, and Korean Steel Daily.
Figure 1.9 shows the average annual wages converted to PPP and the average annual wages, US dollar basis, per employee in full-time equivalent unit in the total economy, compared to 2015. The average annual wages converted to PPP, in all countries increased gradually by 2-4% and it was no significant differences in wage increase rates between countries in terms of the PPP. The annual average wages of Japan in 2024 decreased compared to 2015, due to the yen depreciating by 25% during this period. The labour costs in Japan in 2024 were 5% lower than in Korea, 2.2 times higher than in China.
Note: Panel a) US dollar basis and PPP converted. 2015 = 100. Panel b) Average annual wages, US dollar basis, per employee in full-time equivalent unit in the total economy. China’s data is shown only for manufacturing.
Source: OECD calculation based on (OECD, 2026[7]; National Bureau of Statistics of China, 2026[8]; Trading Economics, 2026[9]; World Bank Group, 2026[10]).
Figure 1.10 shows the domestic producer price index (PPI) for industrial activities in selected economies until December 2024. This index as a proxy for the price index for marine equipment due to the absence of more detailed cost information. The PPI has followed an upward trend since 2016 and has risen sharply since 2020 due to the pandemic and global inflation. Following its sharp rise, price has stabilised at a high level. Norway (174) experiences the highest PPI and China (112) the lowest. Although Japan (118) is the second lowest, its PPI has been increasing.
Source: Publications from the governments; (Louis and China, 2022 (FRED) / 2023 (NBS)[11]), (Eurostat, 2025[12]), (Japan, 2025[13]), (Korea and Louis, 2022 (FRED) / 2023 (BOK)[14]), (Statistics, 2025[15]).
Japan government has a strategically well positioned marine equipment industry. Japan's marine equipment industry is indeed characterised by high self-sufficiency, strong export competitiveness, and advanced technical capabilities, particularly in diesel engines, outboard motors, propulsion controls, and energy-saving devices. The deep integration between shipyards and equipment suppliers enhances resilience and quality assurance, setting Japan apart from other shipbuilding nations.
The industry is a major player in the global supply chain, with outboard motors, reciprocating engines, and navigation-control systems comprising over 80% of exports. Japan's high level of domestic integration (92% of marine equipment on Japanese-built vessels is domestically manufactured) provides strategic security and shields the industry from external supply chain shocks.
The government's alignment of public funding with industrial transformation supports leading exporters and maintains stable repair activity levels, despite global trends. However, ship conversion activities remain limited, with only one notable ammonia propulsion conversion performed in 2023.
1.2.1. Global supply chain (Marine equipment)
The Japanese government has adopted a comprehensive and forward-looking approach to sustainability and innovation. Under the “Green Growth Strategy Through Achieving Carbon Neutrality in 2050,” the government invests in 14 strategic sectors, including shipbuilding and marine equipment.
Japan’s marine equipment industry plays a pivotal role in the global maritime supply chain. It is characterised by an exceptionally high level of domestic self-sufficiency, strong export competitiveness, and technical leadership in core systems such as diesel engines, outboard motors, propulsion controls, and energy-saving devices. Unlike many competing shipbuilding nations, Japan’s industrial ecosystem features deep integration between shipyards and equipment suppliers, allowing for both resilience and quality assurance.
Japan’s five major marine equipment product categories are: diesel engines, outboard motors, pumps, electrical equipment, and cargo-handling systems. In 2020, Japanese firms produced 8 723 diesel engines worth JPY 204 billion, and 277 230 outboard motors valued at JPY 105 billion, confirming the sector’s scale and productivity. These numbers significantly increased by 2022, when Japan produced 420 627 outboard motors (JPY 177 billion) and 10 705 diesel engines (JPY 208 billion), contributing to a total marine equipment production value of JPY 442 billion. According to MLIT, production and value of outboard motors declined in 2024. Nevertheless, Japanese firms produced 11 441 diesel engines worth JPY 264 billion in 2024, continuing the steady growth observed since 2020. In addition, supported by increases in pumps, electrical equipment, and other categories, the total production value rose from JPY 369 billion in 2020 to JPY 470 billion in 2024 (Table 1.4).
Source: OECD Analysis of the marine equipment industry and its challenges (2023), MLIT.
Japan’s export structure, shown in Figure 1.11, reflects the shift toward high-value-added product dominance. Outboard motors, reciprocating engines, and navigation-control systems collectively account for over 80% of Japan’s marine equipment exports. Between 2019 and 2020, Japan exported JPY 370 billion (USD 3.7 billion) in outboard motors alone—nearly double the combined value of similar exports from the EU, US, and China—underscoring Japan’s dominance in this segment. Key markets include the United States, Southeast Asia (Philippines, Indonesia, Viet Nam), and Europe, reflecting the breadth of Japan’s global reach.
Japan’s most unique structural strength, however, lies in its domestic integration and supply chain independence. In 2022, approximately 92% of the marine equipment installed on Japanese-built vessels was domestically manufactured, up from 87% in 2019. This level of self-sufficiency far exceeds that of South Korea (which imports ~25% of marine components) and China, which runs a trade deficit in high-value components such as diesel engines, smart bridge systems, and propeller units.
Source: MLIT.
1.2.2. Conversion & repair
Since 2020, Japanese yards have maintained a stable level of repair activity, following a 20% increase compared to the two previous years. Figure 1.12 shows the development of the number of repairs in Japan compared to the world trend. The figure illustrates that the global repair activity has increased more than the repair activity in Japan since 2018. However, while the global trend has been downward sloping since 2022, repair activity in Japan has remained stable.
Source: (WFR, 2025[16]).
Figure 1.13 illustrates the broad categories of activities that are included in these numbers. Most of the activities are repair yard calls and surveys. Upgrade activities in relation to improved vessel performance or efficiency, accounted for around 4-5% of the repair yard activities in 2020-2022, while in 2023 and 2024 it these only accounted for respectively 1.3% and 0.8% of the activity. This decline may be explained by the impact of the COVID-19 pandemic, where many vessels went into layup, which might have prompted ship-owners to carry out upgrades during the period of reduced operational demand. Table 1.5 illustrates the range and volume of environmental and EST upgrading capabilities of Japanese yards.
Source: (WFR, 2025[16]).
Japanese repair yards are largely servicing domestic companies. Of all the repairs in the period 2018 to the end of 2024, 96,4% of the repair missions came from domestic companies, with no significant change in this proportion when isolating just 2024. In 2024, the four most active yard groups regarding repairs were Sanwa Dock, Shin Kurushima Group, Mukaishima Dockyard and Tsuneishi Holdings, the four of which managed 49% of the total repairs in 2024 (WFR, 2025[16]). All of them are in the Hiroshima or Ehime prefectures of Japan, on the North and South shores of the Seto inland sea
Fuel-conversions are becoming an increasingly relevant subdivision in the shipbuilding industry as new environmental requirements and measures are being enacted in accordance with rising emission reduction targets. However, activity on this field is still sparse. Clarksons registered 11 fuel conversions worldwide in 2024, none of which were performed in Japan (WFR, 2025[16]). Notably, there was one pioneer fuel conversion performed in 2023 by Keihin Dock Co. Ltd, who converted an LNG-fuelled tugboat into ammonia propulsion (NYK Group, 2023[17]).
Note: Propeller retrofits are excluded. Data from 1.1.2018-21.08.2025.
Source: (WFR, 2025[16]).
Figure 1.14 shows that Japan has played only a marginal role in global EST retrofit activity between 2018 and mid-2025. While China and several European countries registered multiple projects—particularly in hull, engine room and CCS retrofits—Japan accounted for only a few cases, placing it among the lower contributors worldwide. Since 2018, Japan has expedited one CCS retrofit, one solar retrofit, and two wind retrofits. This limited engagement reflects the domestic orientation of Japan’s repair yards, which primarily serve local owners, and the industry’s continued focus on newbuilding rather than large-scale retrofit markets. The data underlines that, despite Japan’s technological strength in shipbuilding and equipment, its contribution to EST retrofits remains modest, with no projects recorded in emerging areas such as propeller retrofits.
Japan’s shipbuilding decarbonisation is supported by significant government funding and policy measures. Japan has put ship decarbonisation at the heart of its industrial strategy, notably through the Green Innovation Fund with JPY 35 billion reserved for next-generation ships. Complementary MLIT schemes are subsidising private R&D and fuel-saving equipment to meet IMO regulations.
At corporate-level, net-zero commitments are gaining traction. The top three major shipping groups (Kawasaki Kisen Kaisha (“K” Line), Mitsui O.S.K. Lines (MOL) and Nippon Yusen Kaisha (NYK)), have set 2050 net-zero targets, catalysing demand for low and zero-carbon vessels and equipment.
While transparency for ESG reporting is improving, large disparities remain within yard-level emissions. Major shipping players now publish ESG reports but the disclosure remains far from universal. Energy-related CO₂ from the ten largest builders spans two orders of magnitude (≈5 000–250 000 tCO₂ in 2021).
Japan’s innovation leadership is shrinking. Japan and the EU historically filed the most low-carbon maritime patents, yet Japan’s output has slid since its 2011-2018 peak. Activity is still concentrated in hull-design efficiency (Y02T70/10), while China’s filings have surged since 2019, overtaking other leaders.
Orderbook and completions of alternative fuel capable vessels remain highly concentrated among the top three shipbuilders. Japan comes in 3rd after China and Korea.
Labour shortages and skills gaps. Ageing demographics and limited specialised training constrain capacity. The Shipbuilding Skills Development Centre (six sites) and new university-industry programmes (University of Tokyo-NYK-Mitsubishi “Maritime Digital Engineering” course) aim to upskill the workforce.
Japan’s annual expenditure on R&D in the shipbuilding and maritime industries over the past ten years has remained stable with an average annual R&D expenditure of USD 174 million —as can be seen in. We note that the highest expenditure was made in 2023 with expenses surpassing USD 200 million. Between 2014 and 2024, a total of USD 1.74 billion was allocated to R&D. In terms of purchasing power parity, a budget amounting to USD 322 million has been allocated for the Green Innovation Fund over the 10-year period from fiscal 2021 onwards (Institute for International Monetary Affairs, 2022[18]).
Source: Statistics of Japan (https://www.e-stat.go.jp/stat-search/files?page=1&toukei=00200543&tstat=000001032090).
1.3.1. Patenting activity
Meeting international emissions targets and, ultimately, curbing climate change demands that the maritime sector move decisively toward zero‑ and low‑carbon emission propulsion. Continuous innovation will be crucial to drive down costs, solve outstanding technical challenges and scale new technologies fast enough to align global shipping and shipbuilding with a net‑zero pathway (OECD, 2025[19]). This transition also creates major openings for shipyards and marine‑technology suppliers to design and deliver the next generation of low‑/zero‑carbon vessels. The following section examines how Japan is responding, tracing key low‑carbon innovation trends through its recent maritime patent activity.
Patents can offer a reliable “signal” of technological innovation. Each patent application discloses a novel technical solution, that is timestamped and assigned to an internationally harmonised classification code. Hence, counting patents can allow us to know where and how quickly innovation is advancing in a certain sector. Unlike R&D spendings which focus more on inputs, patents capture the output of inventive efforts. Figure 1.16 provides an overview of global patenting activity in the shipbuilding sector by counting inventions belonging to the international patenting category (IPC) B63 “ships and other waterborne vessels and related equipment” (European Patent Office, 2024[20]). The countries selected represent the top ten most active in terms of patenting activity in this category and for this period. We observe that Japan holds a mid-table position, contributing to a stable share of patenting activity over the decade with a slight increase in filings in 2023.
Source: (European Patent Office, 2024[20]).
We can further narrow our focus on low-carbon patents, identified via the Y02-tag, which the European Patent Offices defines as “Technologies or applications for mitigation or adaptation to climate change”. Specific Y02 patent codes (Y02T70/00) pertaining to “Climate change mitigation technologies related to transportation: maritime or waterways transport” are used to extract relevant patents (European Patent Office, 2024[21]).
In Japan, we observe that innovation activity in low-carbon technologies is decreasing over time—demonstrated in Figure 1.17. In the early 2000s, Japan presents a modest segment which grows rapidly towards the end of the decade sitting on top of a similar sized EU block. Despite the growing pressure to decarbonise the maritime sector, the yearly share of low-carbon patenting activity in maritime technologies patents in Japan peaked between 2011 and 2018 but rapidly declined thereafter. The EU and Japan have consistently shown the most patent filings in this field over this studied period, but China shows a rapid increase in its patenting activity since 2019, surpassing other key innovating countries.
Note: Timeframe 2005–2021 Y02 low-carbon patents including Y02T70/10 (hulls), Y02T70/50 (propulsion), Y02T70/5218 (fuels), and Y02T70/5236 (renewable/hybrid systems).
Source: EU patent office.
To provide a granular view of innovations in maritime technology, the patent codes can further be classified into subcategories that group them based on their focus, thereby permitting a more detailed study of trends and patterns within the low-carbon maritime technology landscape. Table 1.6 explains their breakdown by sub-category.
In Japan, low-carbon innovation is notably concentrated in the design or construction of watercraft hulls (patent code: 70/10) with a rapid increase and peak in the number of these patents in 2015 and 2016. In Figure 1.18, we observe that in addition to demonstrating the fasted climb, this subcategory presents the highest single-year output with a total of 18 patents in 2015. Measures related to the reduction of greenhouse gas in propulsion systems (70/50) show a sharp but short-lived spike from 2010-2012 which then fades. Alternative fuels (70/5218) and hybrid/renewable solutions pickup between 2012 and 2015 but remain low in comparison to the other categories, both show a decline after 2019.
Source: EU patents office.
1.3.2. Decarbonisation
In response to the growing demand for a decarbonised shipbuilding sector, the Japanese government is taking a variety of actions to promote this shift. The Green Innovation Fund for Next-generation Ship Development aims to achieve carbon neutrality by 2050 by continuously supporting companies and organisations committed to ambitious 2030 targets (METI, 2023[22]). Established under the FY2020 Tertiary Supplementary Budget and is managed by the New Energy and Industrial Technology Development Organisation (NEDO).
The programme supports projects that are highly innovative and go beyond basic R&D to encompass demonstration, with participation encouraged from SMEs, venture companies, universities, and research institutions. To maximise outcomes, company managers must commit to the projects, submit long-term business strategies, and implement systems to enhance commitment. Projects with inadequate progress may be cancelled, and incentive measures are in place for achieving targets. Some of the other projects organised by the Green Innovation Fund include cost reductions for offshore wind power generation, fuel ammonia supply chain establishment and the development of next-generation batteries and motors.
Additionally, MLIT provides support to create an environment where the technology can be fully leveraged, based on the outcome of the development of fuel‑saving technologies and works (MLIT, n.d.[24]). Concrete actions include: (1) supporting private‑sector R&D aimed at cutting CO₂ emissions from ships and applying shipbuilding know‑how to offshore resource development; and (2) leading discussions at the IMO on environmental regulation, so that technological progress, dissemination of new technologies, and creation of international rules advance in tandem.
In the private sector, Japanese shipbuilding and shipping companies are actively investing in decarbonisation, driven by corporate net-zero targets and market demand for greener vessels. In 2021, the Japan Shipowners’ Association—comprising major shipping companies such as Kawasaki Kisen Kaisha (K Line), Mitsui O.S.K. Lines (MOL), and Nippon Yusen Kaisha (NYK)—adopted and announced the “Challenge of 2050 Net-Zero.” Accordingly, shipbuilders have been focusing on energy-saving technologies, real-sea performance, and alternative fuel readiness.
Innovation is particularly evident in patent activity related to hull design and propulsion systems. Although Japan’s low-carbon maritime patenting has declined since 2019, the country remains a global leader in energy-saving technology deployment, accounting for nearly 30% of such installations in the world fleet. Private investment also supports the development of alternative-fuel-capable ships, including LNG and methanol vessels, with Japan ranking third globally in methanol vessel orderbooks.
In addition, many Japanese shipbuilding and shipping companies have acquired numerous Approvals in Principle (AiP) —preliminary certifications granted by class societies (organisations that set and verify technical standards for ship safety and design) for the technical feasibility of new designs— on decarbonisation technologies.
In June 2024, Tsuneishi Shipbuilding, Ueno Transtech, and Yanmar Power Technology obtained an AiP from ClassNK for the design concept of a hydrogen-fueled tanker.
In March 2025, Mitsui O.S.K. Lines, Namura Shipbuilding, and Mitsubishi Shipbuilding obtained an AiP from ClassNK for the design concept of an ammonia-fueled ammonia carrier.
In April 2025, Mitsubishi Shipbuilding obtained an AiP from ClassNK for the design concept of an onboard carbon capture and storage system (OCCS).
In June 2025, Mitsui O.S.K. Lines and Mitsubishi Shipbuilding obtained an AiP from ClassNK for the design concept of an LCO₂/methanol multi-cargo carrier.
However, as shown in Figure 1.19, the environmental performance of shipbuilding-related companies varies significantly. An analysis of energy-related CO₂ emissions among the top 10 shipbuilding companies by production volume shows a wide range—from 5 000 to 250 000 tCO₂—when assessed on a company-wide basis.
Note: Data shared by Japan in the Shipbuilding Committee Peer Review Questionnaire (2024).
1.3.3. Alternative fuel trends
Establishing robust supply chains for carbon-neutral fuels—from production to storage and bunkering at ports—is essential for decarbonising shipping (OECD, 2025[19]). A great diversity of new technologies is being developed notably for alternative fuel engines, such as the development of ammonia and hydrogen fuel engines in Japan (Statistics Bureau of Japan, 2024[6]). However, building the necessary infrastructure, ensuring safe fuel handling, and securing the required investment remain critical bottlenecks.
LNG and biofuels are the most widely used alternative fuels in shipping, with vessels capable of running on these fuels having experienced a significant uptake in the global fleet (OECD, 2025[19]). The chart underscores a decade of hyper‑growth in LNG‑capable shipbuilding, led overwhelmingly by Korean yards, with China emerging as a potent challenger and followed by Japan with a smaller share. For Japan, ship completions for LNG-capable ships remain limited with zero in 2014 and 100 in 2023 as shown in Figure 1.20. By contrast, Korea has a strong position in terms of completions for these vessels—almost reaching 500 in 2023, followed by China which has around 200 vessels (Figure 1.20).
Source: WFR.
Moreover, the existing methanol tonnage in Japan’s fleet incentivises increased production capacity for carbon-neutral methanol. Japan ranks third in terms of its orderbook for methanol-capable vessels after China and Korea. In terms of fleet as seen in Figure 1.21, Japan remains in the same position, this time led by Korea first and China second. Orderbook and completions of these vessels remain highly concentrated among the top three shipbuilders.
Source: (OECD, 2025[19]).
LPG-capable vessels show a similar story with Korea leading the way both in terms of orderbook and fleet capabilities—with 88 vessels and 70 orders between 2015 and 2029. China stands at 37 LPG-capable vessels and 57 in its orderbook while Japan has 13 vessels in its orderbook and 21 in its fleet for that same period (Figure 1.22).
Source: (OECD, 2025[19]).
As shown in Figure 1.23, the current alternative-fuel orderbook for Japanese shipyards as of 25 July 2025 contains 72 vessels, corresponding to 10.5% of Japan’s total orderbook, while 614 vessels (89.5%) are still conventional fuel.
Note: Includes vessel larger than 1000 GT. As of 25 July 2025.
Source: (Clarksons Research, 2025[2]).
As shown in Table 1.8, Japan’s alternative-fuel orderbook is distributed as follows: Methanol 32 vessels, LNG 23, LPG 14, Ammonia 2, and Hydrogen 1. Within specific fuel types, Japan’s methanol count follows China and Korea, while for LPG-capable vessels Japan has 14, compared with Korea and China.
Note: Orderbook in number of ships as of 25 July 2025. Analysis with Vessels 1000 GT and above. Alternative fuel-ready vessels are part of the conventional fuel category. Hydrogen also includes hydrogen fuel cells.
Source: (Clarksons Research, 2025[2]).
1.3.4. Energy Saving Technologies
In accordance with their target to reach net-zero emissions of greenhouse gas by 2050, shipbuilding companies also rely on energy-saving technologies (ESTs), including new digital solutions, to offer a cost-effective pathway to reducing emissions. They notably include the development of technologies such as the adoption of air lubrication or wind propulsion systems in Japan (Statistics Bureau of Japan, 2024[6]). These technologies provide a solution to current challenges while minimising demand for scarce carbon neutral fuels and improving performance at sea. This section of the report gives an overview of their uptake in Japanese newbuilding and retrofits.
Looking to builder countries in Figure 1.24, Japan and China emerge as the main suppliers of ESTs to the global fleet, making up 29% and 28% respectively (OECD, 2025[19]). Korea and Indonesia are also notable suppliers. The market for equipment suppliers is diverse, with numerous countries from different regions of the world (Asia, Europe and North America) providing around or below 5% of ESTs within the global fleet.
Source: WFR.
As seen in Figure 1.25, the latest data from WFR highlights the significant growth of China in the EST market. Japan holds a major position in the global shipbuilding market with 4 292 EST-equipped vessels in its current fleet, yet it remains in second place behind China (5 510 vessels), followed by Korea (3 069 vessels). In terms of the orderbook, Japan's EST volume is limited to 324 vessels; while this is at a similar level to Korea (288 vessels), it shows a substantial gap compared to China, which leads the market with 2 091 vessels.
Source: WFR.