Circular Economy

Vision 2020
May 2020
Ministry of Economy, Trade and Industry
Contents
Introduction ................................................................................................................. 2

I. The 1999 Circular Economy Vision and its Achievements ..................................... 5

1. Background to the formulation of the 1999 Circular Economy Vision ............... 5

2. Outline of “the 1999 Circular Economy Vision” .................................................. 7

3. Achievements of the 1999 Circular Economy Vision .......................................... 8

(1) Improvement of the legal system ................................................................... 8

(2) Reduction of waste generation and improvement of recycling rate............... 9

(3) Expansion of environment-related businesses ............................................. 10

Ⅱ. Need for Shifting to a Circular Economy ............................................................ 12

Ⅲ. Direction of Japanese response ........................................................................... 16

1. Transition towards more circular business models .......................................... 16

(1) Manufacturers and service providers - shift to a circular industry that

designs circularity and leads a resource circulation system that incorporates
recycling.............................................................................................................. 17

(2) Waste management and Recycling Industry ............................................... 19

(3) Encouraging voluntary activities toward a circular economy ..................... 20

2. Appropriate evaluation from the market and society ....................................... 21

(1) Information disclosure and performance indicators .................................... 22

(2) Guidance for sustainable enterprises on attracting investment ................. 22

(3) Market creation............................................................................................. 23

3. Early establishment of a resilient resource circulation system........................ 24

(1) Securing recycling capacity and quality in Japan ....................................... 25

(3) Areas where the development of resource circulation systems are urgently
needed ................................................................................................................. 28

Conclusion ................................................................................................................. 31

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Introduction
Sound and efficient waste disposal and advanced circular use of
resources are currently urgent issues around the world. Japan approved the
Circular Economy Vision (Hereinafter referred to as "the 1999 Circular Economy
Vision") in 1999 and it was among the first countries in the world to make such a
commitment, in order to cope with the pressing needs for waste disposal sites
and other issues such as natural resource constraints.

In the 1999 Circular Economy Vision, the aim was to transform the
economic system from one based on mass production, mass consumption and
mass disposal, to a circular economic system where environmental and economic
aspects are integrated. In addition to strengthening the conventional recycling
measures, the vision proposed the full-scale introduction of the 3Rs (reduce,
reuse, recycle), which also included measures to control the generation of waste
(Reduce) and to repeatedly use materials from products or parts which are still
usable (Reuse).

20 years have passed since the introduction of the 1999 Circular

Economy Vision. Although Japan has made progress on the 3Rs, extending the
remaining life of final disposal sites, and improved recycling rates, it is still only
half way to achieving a circular economy.

The significance of the transformation from a linear economy to a circular

economy has already been discussed from various perspectives such as tackling
environmental problems like waste problems, reducing dependence on natural
resources as well as mitigating the impacts of price fluctuations of natural
resources. However, these discussions have tended to focus on how to respond
to issues which already existed in Japan.

Looking at the world, the population is projected to reach 9.7 billion in

2050. This is expected to lead to an increase in the demand for materials such
as biomass, fossil fuels and metals, while bringing an increase in the amount of
waste and making the environmental problems such as global warming worse.
While global economic growth including developing countries and emerging
markets accelerates, the potential amount of materials that can be produced are
limited. In addition, the development speed of these materials has a physical limit.

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Japan depends largely on importing material resources from abroad and,
needless to say, securing a stable supply of these resources is an urgent issue.
Moreover, as economic activities become more level and interdependent, local
issues like waste problems could trigger foreign policies such as restricting
imports of used products and waste, which could affect the global supply chain.
Furthermore, natural resources as public goods including air and water have
been damaged by such economic development and growth. Global issues such
as climate change and marine plastic litter are also facing a tipping point.

As shown above, it is clear that a linear economic model based on mass

production, mass consumption and mass disposal will cease working sooner or
later, not only in Japan but also for the entire world. There is a need to depart
from a growth model that pursues quantitative expansion of wealth under
shareholder-capitalism, which prioritizes short-term interests. In other words, it is
important to shift to a model that aims for robust growth from medium and long-
term perspectives through circular social and economic activities. In this shift,
service-based business models, such as product service system (PSS), will play
important roles. They will maximize the value added by effectively using the
already extracted material stocks in our society instead of natural resources, and
eventually enable us to decouple resource consumption from economic growth.
It is necessary for Japan to contribute to global sustainable development by
quickly changing to such a growth model and, at the same time, to strengthen the
international competitiveness of Japanese industries that will be less dependent
on natural resources and more resilient to fluctuations in product demand.

The development of digital technology and the increasing societal and

market-driven demand for environmental action play key roles in shifting Japan
to a circular economy.

The benefits of digital technology have been widely enjoyed. With the
transition to a knowledge-intensive socio-economic structure (Society 5.0) that
produces services and solutions thanks to Artificial Intelligence (AI) and the
Internet of Things (IoT), industries including manufacturing have already started
to change toward service-based models that do not overly rely on production and
consumption of goods. Also from the conventional 3Rs perspective, further
improvements are expected, such as reduction of production loss through precise

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demand projection and on-demand production activities (Reduce), sharing
service that match the value of unutilized assets with their demand through
visualization (Reuse), and high-quality recycling by utilizing digital technology.

In addition, since the announcement of the Sustainable Development

Goals (SDGs) by the United Nations in 2015, there has been a rapid increase in
societal and market-driven demand for environmental action, which has strongly
encouraged changes in corporate behavior. As environment-related investments
such as Environmental, Social and Governance (ESG) investments are
expanding, the flow of funds that drive the capital economy is changing drastically.
Environmentally friendly efforts, which before might have been seen as a cost for
their businesses, are now overlapping with essential activities for their
businesses that bring value added. Gaining market reputation or providing
benefits to customers are examples of the value added. In response to this trend,
businesses have already started making efforts voluntarily to accelerate resource
circulation. For example, in the case of marine plastic litter, more and more
companies are actively communicating their environmental initiatives and
commitments.

In this way, changing to a circular economy can provide us with a new

frontier that enables us to achieve “a virtuous cycle of environment and growth.”
This is because circular activities that attract public interests, and deliver social
benefits, like conservation of the global environment are evaluated as value
added in the market and create private profit.

In order to realize a circular economy and generate benefits for all

stakeholders, cross-industry partnerships will become even more important.
Since the Edo period (1603-1868), the concept of "Sanpo-yoshi (three-way
satisfaction)", which is the managerial philosophy of the Omi (Shiga Prefecture at
present) merchant meaning "Good for seller, good for buyer, and good for society",
has permeated Japan. As a result, companies have developed their business
activities while placing importance on the close connection between private and
public benefits and taking reliability and good faith seriously. These ethics are
vital to promoting partnerships in a circular economy. In order to achieve a circular
economy, it is necessary for businesses, consumers and governments to play
their respective roles responsibly, and to cooperate not only domestically but also

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internationally. Replacing the term "Sanpo-yoshi" to "Good for businesses,
consumers, and the environment" and promoting a circular economy in
cooperation with stakeholders can be Japan’s form of a circular economy. This
can then create a new capitalist economy.

Based on the above, the international situation surrounding a circular

economy and market changes are opportunities for further growth for Japan. The
Circular Economy Vison for 2020 indicates a new direction in letting Japanese
industries shift to new business models with higher circularity and to improve the
resource efficiency of their businesses, while taking advantage of our industrial
structure. This will strengthen the international competitiveness of Japanese
industries and achieve “a virtuous cycle of environment and growth.”

I. The 1999 Circular Economy Vision and its Achievements

Under the 1999 Circular Economy Vision, Japan's waste and recycling policies
changed from the 1R (Recycle) to a comprehensive promotion of the 3Rs.
Circular use of resources has been promoted through the development of laws
relating to resource circulation, large reductions in final disposal (namely,
landfilling), and improvements in recycling rates. This section describes Japan's
efforts for resource circulation in connection with the 1999 Circular Economy
Vision.

1. Background to the formulation of the 1999 Circular Economy Vision

In 1998, the Fundamental Problem Joint Sub-committee (at that time)

was established to develop the 1999 Circular Economy Vision under the Earth
Environment Committee of the Industrial Structure Council and the Waste and
Recycling Committee. The background behind this was the growing recognition
that environmental problems, which had traditionally been considered local
industrial pollution problems found in limited areas, now reflected a broader global
concern with long-term implications. While people's daily lives and economic
activities depended on resources that were in danger of being depleted, the
amount of waste being generated had continued to increase. The number of
remaining life for final disposal sites was only 8.5 years for municipal waste and
3.0 years for industrial waste at that time. This sense of urgency was particularly

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pronounced in the Tokyo metropolitan area. On the other hand, the recycling rates
of municipal and industrial wastes had stagnated around 10% and 40%,
respectively.

In addition, natural resource constraints became apparent. Since the

Industrial Revolution, but particularly in the 20th century, human beings have
rapidly extracted and consumed finite fossil fuels and metallic minerals. Under
such a situation, the Kyoto Protocol was adopted at the 3rd Session of the
Conference of the Parties to the United Nations Framework Convention on
Climate Change (COP3) held in December 1997. As a result, there was a growing
awareness that climate change was indeed one of the most important
environmental issues that would affect humanity, and that international efforts
should be made to address it.

Behind the appearance of environmental changes and other various

urgent issues, there was a widely adopted linear economy that equates to a mass
production, mass consumption and mass disposal pattern. The linear economy
was accompanied by the increase in individual income during Japan’s high
economic growth period from the mid-1950s to the early 1970s, changes in
lifestyles such as the rapid consumption of home appliances, and changes in
sales methods and consumption behavior due to the emergence of supermarkets
and convenience stores. Under these circumstances, the enlargement of
household appliances and the increase in the types and amounts of containers
and packaging had led to a rapid rise of waste that was difficult to dispose of
properly. In order to achieve both environmental maintenance and sustainable
economic growth, there was an urgent need to transition from a linear economy.
This meant changing the social rules and code of conduct that had been accepted
in the conventional economy and establishing a "Circular economy system" in
which responses to environmental and resource constraints are built into all
aspects of industrial and economic activities. After discussion for approximately
one year at the Fundamental Problem Joint Sub-committee of the Waste and
Recycling Committee and Earth Environment Committee of the Industrial
Structure Council, “the 1999 Circular Economy Vision” was formulated in 1999.

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2. Outline of “the 1999 Circular Economy Vision”

“The 1999 Circular Economy Vision” consisted of four chapters: (1) The
way forward to a circular economy system, (2) Reconstruction of waste
management and recycling measures in Japan toward the establishment of a
circular economy system, (3) Future challenges and policy responses toward the
establishment of a circular economy system, and (4) Current status and issues in
individual areas. The roles of business entities, consumers, and national and local
governments were specified in the activities in order to maximize the
effectiveness and efficiency of the 3R initiatives. Specifically, the following were
the roles to be played by (1) business entities that could efficiently construct a
circular economy system by taking actions that would lead to the reduction of
environmental impact throughout the product life cycle; (2) consumers who would
make consumption choices in the market and who themselves would be the
emitters; (3) the government that could present the direction to be taken and set
conditions; and (4) local governments that would carry out waste collection and
management and promote the actions that residents would be taking toward
environmental conservation.

For concrete actions, priority was given to the areas which had the
characteristics of "Industrial-scale amounts of waste", "High usefulness of the
contained resources" and "Difficulty for disposal" in order to promote the
reconstruction of waste management and recycling measures in Japan. The
measures for the implementation were presented, such as the revised Law for
Promotion of Utilization of Recyclable Resources, the improvement of the
guidelines for Waste Treatment and Recycling (by product category and by
sector) issued by the Industrial Structure Council, and the enactment of individual
recycling acts. The actions that were to be taken by the business sector were as
follows: disclosure of environmental accounting, active disclosure of information
using environmental labeling and life cycle assessment methods, active
promotion of inter-industry cooperation, and development of 3R technologies.

The circular economy system presented in “the 1999 Circular Economy

Vision” was aimed at overcoming the conflict between the environment and the
economy by integrating them through built-in market mechanisms, etc. By doing
so, circular economic and social activities could be appropriately evaluated in the

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market, and environmental conservation costs could also be internalized by
society as a whole. As a result, both economic vitality and a good living
environment could be maintained.

3. Achievements of the 1999 Circular Economy Vision

(1) Improvement of the legal system

After the formulation of “the 1999 Circular Economy Vision”, the Act on
Promotion of Effective Utilization of Resources and the other recycling acts were
revised or formulated. Until then, waste and recycling measures in Japan had
focused on recycling (1R), however, with the aforementioned changes, a
transition to comprehensive promotion of the 3Rs and the role of each actor
promoting the 3Rs were clearly defined. Also, the roles of consumers were
defined as follows; cooperation in extending product life, the use of products
made from secondary raw materials or recycled parts, and contribution to source
separation.

Since then, based on individual recycling acts, Japan has promoted a

system to recycle each product or products categorized into individual groups.
For example, regarding vehicles, the respective responsibilities of car owners,
End-of-Life Vehicle (ELV) collection operators, fluorocarbons collection operators,
automobile-dismantlers, shredders, vehicle manufacturers and importers are
stipulated in the ELV Recycling Act. Under this Act, for items which are difficult to
recycle economically, namely airbags, fluorocarbons and automobile shredder
residue (ASR), vehicle manufacturers and importers are required to properly treat
and recycle them based on the principle of extended producer responsibility (EPR,
physical responsibility in this case). By establishing a mechanism to properly
secure necessary costs for recycling the above-mentioned three items under the
Act, ELV recycling in Japan has been facilitated. Before the time of the
enforcement of the Act, inverse onerous situation was observed in ELV
transactions. However, after the enforcement of the Act, the financial
responsibility was imposed on vehicle owners to deposit a recycling fee for the
three items, which constitute negative costs, at the time of purchase. As a result,
the issue of illegal dumping and improper storing has been greatly improved, and
the ELV recycling system has also revitalized the conventional market

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mechanism due to increasing trade value of ELVs.

For home appliances, based on the concept of extended producer

responsibility, producers cooperate with recyclers to achieve high-quality
recycling. Having the company recycle their own products helps to ensure the
reliability and quality of secondary raw materials.

Japan has updated legislation systems such as the Act on the

Promotion of Effective Utilization of Resources and individual recycling acts to
deal with new issues that arise with social changes and technological
developments. In 2006, the government amended the Act on the Promotion of
Effective Utilization of Resources to oblige manufacturers and importers of
electrical and electronic equipment to affix a label indicating the presence of six
hazardous chemical substances: lead, mercury, cadmium, hexavalent
chromium, polybrominated biphenyl, and polybroinated diphenyl ether. This
amendment attempts to prevent emissions of hazardous chemicals into the
environment, to improve the efficiency of reuse and recycling processes, and to
improve the quality of recycled materials by separating and managing products
during reuse and recycling processes. The government considered various
issues during the discussions for this amendment, including voluntary actions,
the potential for affected parties to technically follow the amendment, and
international harmonization.

Also, the Act on the Promotion of Sorted Collection and Recycling of

Containers and Packaging has been amended to introduce mandatory reporting
and disclosure of municipal government plans for the sorted collection of waste
containers and packaging within their jurisdictions and additional matters related
to such plans for advanced domestic recycling.

(2) Reduction of waste generation and improvement of recycling

rate

As a result of these efforts, the amount of waste generated in Japan has

significantly decreased. Also, the remaining life of final disposal sites were
improved significantly from 8.5 to 21.8 years for municipal waste and from 3 to
17 years for industrial waste, comparing between when “the 1999 Circular

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Economy Vision” was formulated in 1999 and 2017. Regarding cyclical use rates
at inlet 1, Japan’s rate raised from 10% in 2000 to 15.4% in 2016.

Compared with other countries, Japan has a low level of waste

generation. Although there are some inconsistencies in the definitions of the
national statistics, the per-capita municipal solid waste generation amounts for
2017 were 489 kg/person in Europe, 746.6 kg/person in the United States and
335.8 kg/person in Japan, respectively.

Under today’s recycling laws, Japan has achieved high recycling rates.
For example, recycling rates2 of specified home appliances collected within the
recycling system developed under the Act on Recycling of Specified Kinds of
Home Appliances in fiscal year 2018 were 93% for air conditioners, 71% for
cathode-ray tube televisions, 86% for liquid crystal and plasma display televisions,
79% for refrigerators and freezers and 90% for washing machines and dryers. In
fiscal year 2018, under the Act on Recycling, etc. of End-of-Life Vehicles, the
recycling rate 3 of shredder dust reached 97-99% and that of air bags reached
94%. Under the Act on the Promotion of Sorted Collection and Recycling of
Containers and Packaging, high recycling rates were maintained in fiscal year
2018, of 69% for glass bottles 4, 85% for PET bottles5, 92% for steel cans 6 and
94% for aluminum cans 7.

(3) Expansion of environment-related businesses

“The 1999 Circular Economy Vision” states that "Now is the time to
expand frontiers through development of environment-related industries and
technologies. In a circular economy system, companies leading this expansion of
frontiers are expected to acquire new markets and competitiveness."

1 cyclical use rate at inlet = amount of cyclical use/(input of natural resources + amount of
cyclical use)
Cyclical use rate at inlet represents the share of cyclical use (amount reused/recycled) to
total input in the economy and society
2 Recycling rate = Weight of materials recycled/Weight of units treated for recycling
3 Recycling rate = Weight of materials recycled/Weight of materials collected
4 Recycling rate = Weight of materials recycled/Weight of domestic shipment
5 This rate shows collection rate, which is calculated by Volume of total collection/Volume

of sold bottles
6 Recycling rate = Weight of steel cans recycled/Weight of steel cans consumed
7 Recycling rate = Weight of aluminum cans recycled/Weight of aluminum cans consumed

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 In fact, voluntary efforts by private companies have progressed. The
Japan Business Federation (Keidanren) and other economic organizations have
formulated a Voluntary Action Plan for Establishing a Sound Material-Cycle
Society. It has set voluntary goals for each industry and the progress and results
of their efforts are reported. For example, the cement industry is utilizing existing
technology to accept a wide range of waste. More than 20 types of waste from
other industries, such as blast furnace slag, waste tires, coal ash and sewage
sludge are recycled. This results in approximately 28 million tons of raw material
per year, thereby reduces the input of new natural resources. Another example is
one model of reconditioned copiers, which utilize reused parts, accounting for
80% of the product average weight, which results in 79% less environmental
impact than new copiers in the manufacturing process. This indicates that
corporate business models that contributes to circulating resources have been
adopted.

New recycling technologies have also been developed. Such technology

includes the use of lasers for component analysis of aluminum alloys and
advanced sorting methods for resin materials by predicting the composition ratio
based on product information. These have contributed to the improvement of
recycling rates.

With the above movement, the environmental industry is growing steadily.

The market size of the environmental industry in Japan increased from 58 trillion
yen in 2000 to 105 trillion yen in 2017. The environmental industry here consists
of four sectors: "Prevention of environmental pollution", "Measures against global
warming", "Waste treatment and effective use of resources" and "Conservation
of the natural environment." The "Waste treatment and effective use of resources"
accounts for the largest share, reaching 49 trillion yen in 2017. On the other hand,
the market in this sector increased by only about 26% from 39 trillion yen in 2000.
This indicates that this sector is not yet a growth industry capable of creating
value added, even though it should have more growth potential.

One of the reasons behind this situation was that it was difficult to gain
profit from businesses dealing with recycled materials except for highly valuable
metals. While well-managed waste management and recycling systems have
been developed at local levels in Japan, waste management and recycling

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companies are relatively small or mid-sized and tend to operate independently,
which results in relatively less efficient recycling and unstable supply of recycled
materials. This has led manufacturers not to use recycled materials except when
these materials have cost advantages. As a result, the waste management and
recycling industry has not developed sufficiently, which has brought a negative
spiral in which recycled materials usage is not boosted.

In addition, since Asian countries such as China had previously been

active importers of wastes, including plastics, paper products, and lead, the
increase in the amount of collected wastes in Japan had not necessarily
contributed to the growth of the "Waste treatment and effective use of resources"
sector. These Asian countries imported massive amounts of wastes from foreign
countries like Japan, the EU, and the US, to meet the demand for resources along
with the rapid local economic growth. For example, the amount of the imported
plastic wastes in China was 24,000 tons in 1990 and 3,024,000 tons in 2003,
respectively. The amount of imported paper products increased from 423,000
tons in 1990 to 938,000 tons in 2013.

At the global level, waste management and recycling companies, so-

called recycling majors, have taken the lead in resource circulation. They realize
economies of scale by implementing consistent waste management and
recycling covering large areas through making use of large-scale sorting centers
and diligently investing in R&D, especially using digital technologies. In China,
some waste management and recycling companies have actively acquired
European companies and expanded their businesses into Europe and other
Asian countries. Various new business models have also arisen there, such as
businesses that collect mobile phones using digital technologies.

Ⅱ. Need for Shifting to a Circular Economy

As described in Chapter II, the world's population is continuing to

increase, and is set to reach 8.5 billion in 2030 and 9.7 billion in 2050. As a result,
the demand for materials is expected to grow. The amount of waste is also
expected to increase and environmental problems such as climate change are
expected to get more serious.

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 For example, due to rapid increases in GDP and population, global
extraction of resources is projected to more than double from 88 billion tons in
2015 to 190 billion tons in 2060. It is feared that not only will prices of resources
increase, but impacts on the environment will be greater, especially in countries
with abundant natural resources, due to mining of lower-grade resources along
with increased demand.

 In addition, as economic activities become more globalized, the

interdependence among countries deepens. Even issues that were previously
treated at the local level, such as waste problems, could trigger foreign policies
like restrictions on the import of used products and waste. This can affect the
global supply chain. Furthermore, as a result of such development and growth,
natural resources as public goods including air and water have been damaged.
The tangible effects of global issues like climate change and marine plastic litter
have also become apparent.

Under these circumstances, a conventional linear economic model of

mass production, mass consumption, and mass disposal can no longer be
sustained globally. In the past, the priority was placed on short-term shareholder
returns, and countries competed for quantitative expansion of material wealth.
However, now is the time to change from a growth model based on short-term
views to another model that incorporates both medium and long-term
perspectives. In other words, it is important to change to a model that aims for
sustainable growth over the medium to long-term through circular economic and
social activities that maximize value added through services, etc., while reducing
resource inputs and consumption in all economic activities and making effective
use of social stock.

From the 3Rs as environmental activities to a circular economy as

economic activities
In response to the shortage of final disposal sites, which has become a
serious social issue in Japan, Japan has been promoting 3R activities by making
use of regulatory measures since the formulation of “the 1999 Circular Economy
Vision”, such as the enactment of the Act on the Promotion of Effective Utilization
of Resources and the establishment of other recycling acts. As a result of these
systems and initiatives, the amount of waste has been significantly reduced while

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the amount of circulated resources has been increasing. The separation of waste
has also become commonplace and widespread across Japan. Thus, Japan has
realized one of the best levels of the 3Rs practice in the world.

However, the number of remaining years for the final disposal sites and
the rate of circulated resource use have leveled off in recent years. Meanwhile,
Japanese efforts to recycle resources have stagnated. In addition, the "Waste
treatment and effective use of resources" environmental industry has expanded
by only about 26% since 2000, and it is clear that this industrial sector does not
generate much value added. This shows the limitations of implementing the 3Rs
as environmental activities. Therefore, it is time to transform our circular efforts
into economic activities that incorporate environmental activities, in short, a
circular economy.

Driver of the transition to a circular economy

“The 1999 Circular Economy Vision” also pointed out that Japan needed
to shift to such a circular economy, but it was difficult to realize the vision due to
the social and economic condition at that time. However, the situation has
changed, providing us with the two keys to this transition; the development of
digital technologies and the growing demand from markets and society for
environmental action.

With the advances in digital technology, the transition to a knowledge-

intensive socioeconomic structure (Society 5.0) that produces service solutions
through AI and IoT is progressing, and the change to a service model that does
not depend on the production and consumption of goods is beginning. This
enables a variety of approaches beyond the conventional 3Rs to achieve
improved resource efficiency and waste reduction.

For example, when a highly responsive build-to-order production system

can be constructed by utilizing digital technology, it will be possible to minimize
opportunity loss and reduce waste loss by having the markets supply in direct
response to demand. In addition, service models like sharing and subscription,
which provide value by integrating products and services, are expanding in place
of the conventional business that focuses on product sales. Active transition to
this service model may lead to more efficient use of resources while creating new

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added value like improving the convenience for users. Of course, the use of digital
technology will also help increase the efficiency of the 3Rs themselves.

In addition, since the adoption of the SDGs by the United Nations in 2015,
there has been a rapid increase in the demand from markets and society for
environmental action, and this has strongly encouraged changes in corporate
behavior.

Needs from consumers have the greatest impact on production and sales
activities. When consumers take the lead in purchasing products with low
environmental impact, companies are incentivized to develop environmentally
friendly products. As a result, a wider range of environmental consumer choices
will lead to even more environmentally friendly products and services. Consumers
and businesses are “like two wheels of a cart” in the market as each depends on
the other. Increased consumer and business awareness will play a significant role
in the transition to a circular economy.

In recent years, investors have increasingly played a role as a driving

force for the transition to a circular economy through ESG investments and the
like. Index funds that invest in companies leading the way to a circular economy
and thematic investment funds that invest in projects that promote a circular
economy are emerging. An increasing number of investment companies refer to
a circular economy in their investment declarations based on stewardship codes.
It is expected that investors will continue to encourage companies to transition to
a circular economy through the exercise of their voting rights and other forms of
engagement.

In response to this trend, businesses are voluntarily starting to make

efforts towards resource circulation, and an increasing number of companies are
actively communicating their own environmental initiatives and commitments.

In this way, transitioning to circular economic activity creates private

interest, allowing the transition to be evaluated as added value in the market,
through activities that are undertaken in the public interest (by providing social
benefit) or for the conservation of the global environment. It can be said that this
is a new frontier that creates “A virtuous cycle of environment and growth".

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 The transition to circular economic activities is a source of
competitiveness which will enables us to break into this new frontier and lead to
increased business sustainability in the mid- to long-term. Therefore, companies
are expected to consider circularity while drawing up their management and
business strategies, voluntarily transforming their businesses into cycles of
production and recycling. It is necessary for companies to flexibly optimize their
business operations in response to varying circularity requirements based on the
conditions of each country or market. Therefore, introducing regulatory measures
that are applied to only local business activities could lead to ossified activities,
hinder creativity and originality, and reduce international competitiveness.

Japan should achieve a circular economy through encouraging companies’

voluntary activities by making the most of digital technological developments and
using “evaluation from the global market” as drivers, with minimal introduction of
regulatory measures.

Ⅲ. Direction of Japanese response

1. Transition towards more circular business models

All companies have social responsibilities which include maintaining

environmentally friendly standards when engaging in economic activities.
Japanese enterprises already conduct business with appropriate prevention of
direct environmental pollution through preventative measures. Along with the
rapid growth of the world economy, it has turned out that we have limited
amount of natural resources. Every industry must recognize that they need to
improve their resource efficiency and transform their business models into more
sustainable ones.

There are various kinds of business models that improve resource

efficiency and circularity beyond the traditional 3Rs. Companies should take the
most suitable circular measure at every process of their value chain based on
their business model. In other words, companies should design the total
circularity of their products or services based on their life cycle.

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 Japanese enterprises should take these sustainable measures not only
for improving waste management and recycling in Japan but also for
strengthening their industrial competitiveness. Many countries such as the EU,
China, and Asian countries have already started considering policy measures
including regulations to achieve a circular economy. As a result, circular
business activities get to be appropriately valued in the market and create value
added. In other words, businesses which do not take into account
environmental aspects are considered as a critical risk factor. Therefore, shifting
to a circular business model will increase business sustainability and bring long
term competitiveness. Japanese companies should seize business
opportunities under this circumstance and create a virtuous cycle of
environment and growth, which is driven by breakthrough innovation.

(1) Manufacturers and service providers - shift to a circular industry

that designs circularity and leads a resource circulation system that
incorporates recycling

All types of manufacturers and service providers including the

distribution industry and online platformers which take advantage of digital
technologies should be responsible for contributing to developing a resource
circulation system that incorporates recycling by (a) taking their responsibility as
an industrial waste generator seriously, and (b) designing highly circular
products and service models.

Achievement of high circularity by taking advantage of our industries’

strengths
Along with servicization (PaaS/MaaS) which is being brought about
through improvements in digital technologies, value added provided by products
has switched from hardware to software. Under this situation, moving toward
the circular economy can provide Japanese manufacturers with new value
added. Our highly sophisticated manufacturing industry can take advantage of
the circular economy by seeking higher upgradability and sustainability on the
premise that longer-lasting products will be more highly evaluated in the market.
Since sophistication and durability are generally required to extend product
lifespan, this can enable Japanese companies to cover the disadvantage they
face in servicization, which implies manufacturing simpler products.

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 In addition, our manufacturing industries can apply their business
customs that utilize close communications to reach a better understanding of
needs across various stakeholders. Our competitive material and parts industry
also has advantages in a circular economy since various aspects that circular
products require can be incompatible with each other. In other words, durability
and functionality can conflict with decomposability and recyclability. For
instance, food packaging composed of multiple layers enables better food
preservation, but is not suitable for advanced recycling. Therefore, companies
should aim to create a new market through innovation, for example by utilizing
mono materialization that produces high-quality mono materials with multiple
uses or by making the most of eco-design, which is achieved with close
communication throughout product chains.

Regarding plastics, the Clean Ocean Material Alliance (CLOMA) was

established in January 2019. A wide variety of enterprises in the plastic supply
chain have joined the alliance and are cooperating to develop alternative
materials and introduce 3Rs measures in order to overcome the marine plastic
litter issue. It is essential to encourage innovations that can solve problems by
supporting this kind of supply chain cooperation among various stakeholders.

Promotion of manufacturer- and service provider-led collection and

recycling
Products in the market are distributed to users and finally disposed of
as waste. In order to achieve a circular economy, it is important to develop an
effective system to separate and collect used products, which enables them to
be reused or recycled efficiently. From this viewpoint, manufacturers that use
recycled materials for their products should play an essential role in designing
the circularity of products and value chain management including recycling. For
example, currently, home appliance manufacturers cooperate with waste and
recycling companies in operating a consistent recycling system that has
achieved high recycling rates.

It is important to put each used products into as suitable collection

system as possible considering their emission source and condition and to
reuse and recycle them in the most appropriate way. Enterprises are
encouraged to achieve resource circulation throughout product life cycles by

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distributing and collecting products while maintaining ownership through
leasing, sharing, and subscription-based business models, or developing a
recycling route with recycling and waste companies.

Enterprises, especially global consumer goods suppliers, have already

started voluntary collection. In other countries, the introduction of a minimum
requirement for recycled materials usage is being considered. In Japan, we
should encourage and support these voluntary activities by enterprises while
examining circulation conditions of each material or product.

(2) Waste management and Recycling Industry

The Waste and Recycling industry have an important role in achieving a

circular economy. Waste and recycling companies are expected to become a
‘resourcing industry’ which provide manufacturers with high quality recycled
materials collected from all types of used products, which will support
manufacturers in responding to demand from society and markets for
environmental action.

For that purpose, relevant companies should adopt business models

that incorporate better recycling systems that are cost effective and better in
environmental aspects from life cycle perspective. Commodity items such as
daily necessities are so widely distributed to users that it is difficult to predict
when and where they are discarded. As a result, there is a technical limitation to
designing a circular system for such manufacturers. Therefore, it is important for
waste and recycling companies to collect enough volume of used products for
their operation and secure stable supply of high quality recycled materials. The
government should consider making use of a system that enables recyclers to
operate in larger geographical regions (outside their own prefecture) like under
the Act on Promotion and Recycling of Small Waste Electrical and Electronic
Equipment, and foster recycling industries that can compete in global markets.

It is also critical to improve the environment where these recycled

materials are actively used. One of the reasons why recycled materials have not
been more actively utilized is the presence of information asymmetry in addition
to weak cost advantage. In Japan, more than 100 thousand waste and recycling

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companies with relatively small areas of operation are located all across Japan,
but manufacturers which use recycled materials have not shown interest in
actively using recycled materials produced by them. As a result, there have not
been any opportunities for them to match demand and supply, including for the
quality of these materials. It is therefore essential to develop a transparent and
reliable market for recycled materials.

Creating and maintaining detailed standards related to recycled

materials, including those related to their quality and criteria for use is effective
in enabling manufacturers and waste management recyclers to communicate
with each other smoothly. Through the use of such standards and criteria,
manufacturers could expand the usage of recycled materials, which would also
bring cost advantages.

(3) Encouraging voluntary activities toward a circular economy

Many countries have already started introducing measures to shift to a

circular economy. The government should seek harmonization of standards for
products and industrial activities to ensure that Japanese enterprises can keep
pace with their competitors in the global market. On the other hand, each
country faces a unique situation based on their culture, geographical location,
industrial structure and present infrastructure. Therefore, each country should
independently determine the most appropriate measure to shift to a circular
economy, following the global basic principles such as waste hierarchy and
extended producer responsibility (EPR).

Now, member countries at the International Organization for

Standardization (ISO) are discussing management standards for a circular
economy. Japan should actively contribute to the discussion so that various
measures are appropriately evaluated based on each country’s situation and
vision for a circular economy. In this way, various measures can be adopted
depending on the specific circumstances in each country.

Japan has promoted the voluntary activities of enterprises through soft

laws such as the Act on the Promotion of Effective Utilization of Resources and
voluntary action plans after introducing regulatory recycling systems for large-

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volume waste including packaging and containers, automobiles, home
appliances, food, and construction waste, responding to the limited capacity of
disposal sites in the 1990s. As a result, Japan succeeded in solving the landfill
site capacity problem and taking the global lead in effective resource utilization.

Transitioning to a circular economy is a source of competitiveness for

acquiring this new frontier, which also leads to enhanced sustainability of
business activities in the medium- and long-term. Companies are expected to
actively put circular business activities in their business and management
strategies. It should be noted that ideal methods of achieving a circular economy
should differ based on culture, geographical location, industrial structure and
present infrastructure for each country or market. Companies should maintain
flexibility in order to optimize their global business operations and deal with the
demand from each market. Therefore, introducing regulatory measures that are
only applied to local business activities could cause activities to stagnate, hinder
their creativity and originality, and reduce their international competitiveness. One
of Japan’s strengths is that voluntary industrial activities work effectively, so
Japan should achieve a circular economy through accelerating companies’
voluntary activities by making use of soft laws like guidelines and showing
milestones, with minimal introduction of regulatory measures.

2. Appropriate evaluation from the market and society

Since the SDGs were adopted in 2015, demand from society and markets
for environmental action has rapidly increased, which has made behavioral
changes in investment and consumption, such as the expansion of ESG
investment and ethical consumption, thanks to the increased speed of
information transfer with today’s information-rich society. Environmentally friendly
activities that have only been recognized as costs until recently are turning to a
source of value added by allowing the creation new businesses, and are an
important factor in drawing funds, which affects the capital economy.

A circular economy is a theme that directly connects to some SDG goals

and draws attention as an investment destination for ESG investment by major
financial institutions. Companies should shift their business models to circular
ones that are beyond the traditional 3Rs, enabling them to acquire trust and

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positive evaluations from society and the market and opening up business
opportunities.

(1) Information disclosure and performance indicators

To receive appropriate evaluations from the market and society at large,

it is important for enterprises to present their circular activities through active
disclosures and providing explanations of their social responsibility.

Japanese enterprises have actively made efforts to achieve the 3Rs.

However, it is sometimes pointed out that these activities are not recognized
and evaluated appropriately in the global market. Regarding the plastics
industry, the number of enterprises which actively provide information about
their activities and commitment has been increasing since the marine plastic
issue became a global focus. Other companies should also provide such
information and show their stance to commit themselves to contributing to a
circular economy through their corporate vision.

It is also necessary to develop a system to appropriately evaluate each

company’s activities individually. In some countries, recycling is emphasized to
achieve a circular economy and the mandatory utilization of recycled content is
under discussion. However, there are various activities that contribute to a
circular economy including reducing, sharing, and usage of alternative
materials, and therefore it is important to develop indicators that indicate these
various activities.

We need to properly evaluate how value added and social value are produced
by these activities, while minimizing resource input.

(2) Guidance for sustainable enterprises on attracting investment

The amount of ESG investment is expected to increase both in Japan

and around the world, and enterprises should actively attract these investments
by promoting their voluntary circular-economy activities. It is important for them
to build “co-creation” relationships with investors to transit to a circular economy

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together by actively disclosing their circular economy activities and attract
investment.

New financial products have been created recently such as an index

fund targeting companies promoting circular activities and a thematic fund
targeting circular projects. Unfortunately, it has been suggested that Japanese
companies are outside of the scope of these funds due to their lack of effective
disclosure of activities.

Therefore, the Japanese government is going to establish a “Guidance

for investment in a circular economy” to help enterprises and investors build a
common understanding and establish smooth communications through
information disclosure regarding circular activities. These strategies generally
bring long-term rather than short term profits. This guidance is expected to
support enterprises in placing the circular economy in their management
philosophies and business models and to show how they will realize
comprehensive action based on them. This will result in attracting responsible
investments from medium- and long-term perspectives.

(3) Market creation

Towards a circular economy, it is also important to maintain an

environment where circular products and business models are appropriately
evaluated, get a fair price in the market.

“Circularity,” unlike energy efficiency, doesn’t necessarily give

consumers direct benefits, so it does not always lead to consumers’ willingness
to pay today. Taking a plastic litter issue as an example, according to the results
of the poll about environmental issues by the Cabinet Office in August 2019,
only 13.7% of the respondents said they would purchase alternative products
without considering price or quality, in order to address a plastic litter issue. This
reflects the reality that most consumers prioritize advantages in cost and/or
quality.

In order to improve the situation, first we should establish a market for

sustainable products by public procurement or visualization showing their

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circularity. Japan has introduced several policies such as the Eco Mark and the
Act on Promotion of Procurement of Eco-Friendly Goods and Services by the
State and Other Entities. It is important to expand and deepen these policies in
a harmonized way with the global demands of the market. Business-led
initiatives to develop industrial standards and labeling system will be necessary.
Along with them, the government should consider incentivizing enterprises to
use recycled materials for their products and encouraging consumers to
purchase these products.

Of course, the most important element for promoting a circular economy

is to enhance the environmental awareness of consumers. Consumers need to
understand that they have a responsibility to actively purchase environmentally
friendly products and to change their consumption patterns and lifestyles to
incorporate higher circularity, through such behaviors as minimizing waste, with
a perception that they are members of a circular economy system.

The Japanese are known to have the most meticulous system for the
separate collection of waste. Individuals’ awareness of environmental issues
has steadily continued to increase, so it is necessary to keep conducting
educational activities and making use of nudge theory, which is a useful
behavioral economics measure, to make them adopt circular lifestyles.

3. Early establishment of a resilient resource circulation system

The situations of waste management and resource circulation both

inside and outside of Japan have changed dramatically. Due to the waste import
bans by Asian countries like China, waste paper and plastic waste have
accumulated in Japan, causing issues like falling prices of recyclable materials
and increased processing costs. Also, the increase in logistics expenses due to
the recent labor shortage has impacted waste management and recycling
companies. Furthermore, enterprises that accept waste and by-products from
other companies such as the steel and cement industries are on the decline in
Japan. As a result, it has been getting more difficult to maintain the current
resource circulation system from both medium and long-term perspectives.

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 It is necessary to rebuild Japan’s resource circulation system from the
viewpoint of the medium and long-term, taking into account the future
depopulation and aging of society.

We need to consider both the maximum resource circulation in the nation and a
well-balanced international resource circulation that is compatible with it.

(1) Securing recycling capacity and quality in Japan

To achieve the maximum resource circulation in the nation, it is

essential to optimize resource inputs and to expand circular utilization of
resources. Also, these two activities should be maximally balanced. In addition,
considering that all products are eventually discarded as waste, it is critical to
ensure that recycling technologies are advanced and diversified and that the
recycling capacity is secured.

When discussing advanced and diversified recycling technology, it is

important to examine the forecasted demand and supply of base metals,
including ferrous metals, aluminum, and copper, cement, paper, glass, plastics
and so on, and the possibility of usage of recycled materials.

For example, the demand for aluminum forged products for automobile
engines, which are the main use of recycled aluminum, is expected to decrease
due to the wide spread of electric vehicles in the world, but the demand for
recycled aluminum for wrought aluminum alloy is increasing since this type of
alloy can contribute to lighter-weight automobiles. Regarding plastics, Japan is
planning to expand the usage of recycled plastics following the “Resource
Circulation Strategy for Plastics,” and it has started developing new recycling
technologies like chemical recycling.

In terms of minor critical metals, such as rare earth elements, the

development of alternative materials and the development of recycling
technology have been in progress since 2010 in response to the Rare Earths
Crisis. On the other hand, challenges on the demand side for using these
materials are becoming apparent. There are other materials such as
phosphorus for which the necessity of a stable, secure supply has been

25
increasing. Therefore, Japan needs to analyze the forecasted recycled
materials usage for individual materials and to work on research and
development activities aiming to advance and diversify the usage of recycled
materials. Based on the findings, it should also figure out the best mix of
recycling technologies considering environmental impacts and conditions of
used products and waste. The current social infrastructure, which includes
waste management and recycling infrastructure, previous introduction of
technologies, and technological feasibilities, should be taken into account when
determining the necessary technologies.

While weighing what kind of products can use recycled materials, it is

essential for manufacturers that use them to develop and communicate criteria
for usage of these materials. It is recognized that recycled materials have lower
quality than virgin materials under traditional recycling technologies focusing on
cascade recycling, but it is gradually becoming possible to produce recycled
materials with identical quality to primary materials, thanks to advanced
recycling technologies. Therefore, it is important to review the current product
standards, Japanese Industrial Standard (JIS), and regulatory standards based
on the latest technologies to expand usage of recycled materials. Also, it is
necessary to prepare a certification scheme that enables usage of recycled
materials to be evaluated as environmental value.

Moreover, it is quite important to secure recycling capacity in the

nation, especially with the amount of plastic wastes that have accumulated due
to import restrictions by Asian countries. Japan should consider introducing
support for capital investments by companies.

Improving collection, dismantling, and separating technologies is also

indispensable for efficient recycling. In the waste management and recycling
industry, labor intensive methods still dominate. In order to deal with the
declining population in the future, this industry should adopt further automation.
AI technologies can efficiently and effectively improve optical sorting, magnetic
separation, and sink-float separation. Continuous human resources training is
also required.

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(2) International resource circulation and global expansion

It is significant to expand Japan’s advanced circular technologies and

systems overseas, as many countries have been shifting to a circular economy.

Japan has advantages in the waste management and recycling field,

such as environmentally friendly materials like marine biodegradable plastics,
eco-design under Act on the Promotion of Effective Utilization of Resources,
manufacturer-led recycling systems under individual recycling laws, and highly
efficient waste management techniques. It is essential to incorporate these
technologies and systems into Asian countries where many Japanese
companies have manufacturing bases and to contribute to international
resource circulation and earn value added. In some Asian countries, including
China, Thailand and Indonesia, model projects conducted in cooperation with
Japanese enterprises’ local branches and local governments are in progress.
The government should keep supporting these activities through
intergovernmental dialogues.

In addition, it is necessary to rebuild an international resource

circulation system from the middle and long-term viewpoint. While Asian
countries have introduced import regulations on wastes and the EU
Commission has stated that the EU does not export its waste challenges to third
countries, Japan also needs to rapidly develop a domestic resource circulation
system. However, it should also consider a sound international resource
circulation system since Japanese manufacturers making use of recycled
materials are not necessarily located in Japan, due to the advance of the
division of labor undertaken by manufacturers around the world.

In order to smooth the international trade of recycled materials and used

products, it is important to ensure appropriate management in third countries.
To establish a certification system might be one solution. Adding such a
certification system to the Basel Convention, which regulates transboundary
movements of hazardous wastes and their disposal, or addressing it in the
discussion of international standardization of circular economy management
might both be considered. Supporting the establishment of an international

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resource circulation system might play an important role in improving both
awareness and trust in Japanese enterprises.

(3) Areas where the development of resource circulation systems

are urgently needed

Japan has promoted the 3Rs through Act on the Promotion of Effective
Utilization of Resources, individual recycling acts, and industry’s voluntary
activities etc. On the other hand, there are some areas without enough circular
activities such as sectors that are outside the scope of the current legislations
and products which have since rapidly risen to prominence.

It is crucial to secure Japan’s sound waste management and resource

circulation system and to enhance the competitiveness of Japanese companies
by rapidly moving toward a circular economy in these areas. Key areas where
the development of resource circulation systems are urgently needed are below.

 Plastics
Plastics are useful materials that are useful in our daily lives by reducing
food loss and improving energy efficiency of transportation, since they are light,
easy to mold, and highly functional. The international demand for resource
circulation for plastics has been increasing since the marine plastic litter issue
started drawing attention, and Japan is also going to increasingly promote the
3Rs and expand the use of alternative materials, following the “Resource
Circulation Strategy for Plastics.”

In the industry, companies have accelerated their voluntary 3Rs

commitments, use more alternative materials, and develop chemical recycling.
Setting up an environment where companies can smoothly work on these
activities is urgently required.

 Textiles
Textiles are essential to our lives. On the other hand, it is pointed out
the 73% of discarded cloths are burned or landfilled around the world. People
are very focused on the circularity of textiles and this has been designated as
one of the key value chains in the EU’s “Circular Economy Action Plan.”

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 It is necessary for the textiles and apparel industry to review their
business models that tend to constantly over-supply. This means they need to
respond to consumer demand and improve circularity of distribution and sales
through mass-customization, promotion of e-commerce, and active deployment
of sharing models, ensuring higher value added of the industry by making the
most of digital technology.

In addition, it is important to promote textile recycling. Some companies

have already started collecting their products in stores and send them to
developing countries, but increasing recycling levels is still critical. Recycled
textiles made of PET bottle wastes has been implemented. Development of
functional mono material textiles that are easy to recycle and technological
development which enables recycling from textiles to textiles are still required.

 Carbon Fiber Reinforced Polymer (CFRP)

CFRP is a light, durable and heat-resistant material. The demand for
CFRP is expected to increase, especially in the automotive and aircraft
industries, due to its GHG reduction effect resulting from their lighter weight.
Japanese companies have a large global share of the CFRP market. These
companies have actively developed advanced technologies. However, there are
challenges in recycling of CFRP in the current processes, and efficient recycling
technologies, including the use of recycled CFRP, are required.

Producers and users of CFRP have been working on developing

recycling technologies, evaluation methods for recycled CFRP and other
improvement for CFRP. For example, the Innovation Structure Material
Association (ISMA) was the first entity in the world that succeeded in producing
a chassis made of thermoplastic CFRP. These activities should be accelerated,
and a global circulation system should also be established in cooperation with
the EU.

 Batteries
Rechargeable batteries such as the ones used in small home
appliances are appropriately treated in the recycling system. This system lets
manufacturers collect their products based on the Act on the Promotion of
Effective Utilization of Resources and certified operators to collect them based

29
on the Act on Promotion of Recycling of Small Waste Electrical and Electronic
Equipment. However, small products with lithium-ion batteries are sometimes
unintentionally included in collected materials or wastes, which cause fire and
other accidents during recycling and prevents smooth recycling operations.
Small, high-capacity lithium ion batteries are widely used in a large variety of
products that are not targeted by the current legislations. Ideal recycling and
collecting systems should be developed considering characteristics of these
products and distribution routes.

Regarding automobile batteries, the amount of discarded batteries is

expected to increase along with the increase in the number of electric vehicles.
Car manufacturers have already started to recycle them utilizing the national
permit system of the Waste Management and Public Cleansing Act. In addition,
they have considered refurbishment for secondary use for automobiles and
reuse as stationary fuel cells in households. It is important to steadily promote
these activities.

 PV Panels
Installation of PV panels dramatically increased after 2012, when Feed-
in Tariff Scheme introduced in Japan. It is expected that the volume of discarded
PV panels will hit a peak between around 2035 and 2037. This means about 170-
280 thousand tons of PV panels will be disposed of per year, which equal to 1.7-
2.7% of Japan’s total final disposals if industrial waste. Concerns about neglected
PV panels and illegal disposal have been rising because there tends to be a large
amount of turnover among main operators during an operation period, due to low
entry barriers to the solar power business.

A bill to establish a new system of disposal reserves that calls on solar

power business operators to accumulate external funds to cover disposal costs,
has been submitted to the Diet in order to ensure the proper disposal of PV panels.
In addition to this, it is necessary to consider appropriate reuse and recycling,
because the volume of discarded PV panels is expected to be high enough to
deal with the issue only by crushing and reclaiming them. The R&D such as a
delamination technique have been advanced by NEDO. Also, diversification of
the use of recycled glass from the PV panels that account for the biggest portion
of a PV panel have been considered, mainly by recyclers and users of recycled

30
glass, in addition to developing methods for collecting the valuable metals like
silver contained in the PV panels. Looking at the future when the volume of
discarded panels will increase dramatically, it is necessary to discuss a method
of appropriate reuse and recycling that takes into account the activities above,
while recommending long-term use to reduce the number of discarded PV panels.

Conclusion
Japan is one of the first countries that started shifting to a circular
economy and society. Since the “1999 Circular Economy Vision” was drawn up
in 1999, the amount of waste in Japan has been dropping and the recycling rate
has been improving dramatically under individual recycling laws. On the other
hand, the domestic and international situations have drastically changed since
then. In Japan, the labor shortage has become serious due to declining
population and aging, which requires us to review and rebuild the current social
and economic system. Internationally, the demand for resources has keep
growing along with population increase, resulting in higher uncertainty of securing
a necessary supply of resources in the middle- and long-term. In addition,
demand for environmental action from consumers and investors has been
increasing due to the recent focus on the marine plastic litter issue and the
increase in extreme weather events around the world, which have been linked to
climate change.

The current situation requires that Japan shift from a traditional linear
economy to a circular economy. We should recognize this requirement not as a
cost but as an opportunity for industries to grow, which will lead to a new capital
economy. Japan, among other countries, has taken the lead in promoting the 3Rs
and developed many advanced environmental technologies. Also, Japanese
companies have been voluntarily moving to a circular economy in line with the
development of digital technologies and the increasing demand for environmental
action from consumers and investors. It is essential to harmonize with the
international community that is aiming for a sustainable society and to realize a
virtuous cycle of environment and growth by introducing these activities to the
world and enhancing them.

This vision shows the direction for Japan to quickly shift to a circular
economy, to strengthen competitiveness through global markets and to realize

31
sustainable growth. The government has started discussing how to realize the
“Resource Circulation Strategy for Plastics”. For other areas, it is important to
understand the current situation and introduce necessary policies. Shifting toward
a circular economy represents a major chance for Japan. The government will
steadily follow this vision and lead the international community towards a circular
economy.

Finally, we would like to express our deep appreciation for committee

members and others who have supported the formulation of this vision.

“Economy without circularity is vice, and circularity without economy is a

castle in the sky.“

This comment was uttered by one of the committee members, based on

the famous proverb by Sontoku Ninomiya, “Economy without moral is vice, and
moral without economy is a castle in the sky.” We hope that a circular economy
becomes fundamental standards that must be taken into account when we
undertake industrial, economic and social activities.

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