Publication date: Jan 18, 2026
Japan to Subsidize Up to 50% of Investment in 100% Decarbonized Data Centers
Domestic data center (DC) electricity demand is growing rapidly and is expected to increase by more than 5 GW to a total of 6.16 GW over the next decade (CAS 1), and according to Japan Electronics and Information Technology Industries Association (JEITA), the market is projected to expand from JPY 4.35 trillion in 2025 to JPY 5.65 trillion by 2030 (JEITA).
To align the rising data center demand with the use of decarbonized electricity, the government has announced a new scheme, which will subsidize up to 50% of investment costs for data centers and factories that use 100% decarbonized power. A total of JPY 210 billion will be allocated over five years starting in FY2026 (CAS 2). The new scheme will be implemented in parallel with an existing subsidy scheme that provides 50% support for the construction of data centers aimed at regional decentralization(excluding Tokyo and Osaka).
Subsidy Eligibility Structure and Strategic Implications
The level of support will depend on the nature of the investment. For instance, projects that use 100% renewable electricity from newly built power plants and located within the same area as the power source are eligible for subsidies of up to 50%, while projects relying on existing power plants with facilities located outside the power source area receive lower subsidy rates. Furthermore, while the subsidy will cover up to 50% of investment costs for mid-sized and small enterprises, it only covers up to one-third for large companies.
Shulman Commentary:This new subsidy scheme creates significant opportunities and compliance complexity for data center operators and investors. Securing decarbonized power while maximizing subsidy eligibility requires strategic coordination between renewable procurement, grid interconnection, and battery storage optimization – areas where Shulman Advisory specializes in helping clients model optimal configurations and structure compliant, economically advantageous decarbonization strategies.