Japan Considers Tax On Coal Imports

by Mary Swire, Tax-News.com, Hong Kong

06 September 2002

Japan is considering the introduction of a tax on coal imports in order to encourage the country's steel industry and power utilities to move towards 'greener' fuels such as natural gas, the Ministry of Economy revealed this week.

Japan is one of the world's biggest importers of coking coal - used in steel-making - amd is also one of the largest consumers of thermal coal, used to generate power.

Speaking to the Reuters news service on Wednesday, mining analyst with BNP Paribas in London, Charles Kernot predicted that the proposed tax is likely to be levied on thermal coal rather than coking coal, as there are fewer alternatives available to Japan's steel industry.

However, analysts have suggested that any move to impose new taxes on imported coal is likely to prove highly unpopular with Japanese power industry, which also feels that there are few viable alternatives available to it:

'The feeling seems to be that there'll be some tax, but there is no other option for Japan in terms of power generation at the moment than the exposure they have to coal,' an unnamed industry insider told Reuters, adding that: 'Power utilities have got no money, the Japanese economy is teetering, and they're not in a position where they can undertake new capital investment into gas-fired power plants.'

A report published in Australian Financial Review following the Ministry of Economy's announcement has confirmed fears that any such move is likely to have repercussions on a regional, if not an international level. Japan represents the Australian coal industry's largest customer, and the AFR reported on Thursday that the share prices of major coal exporters such as Rio Tinto, BHP Billiton, and MIM Holdings all suffered as a result of the coal tax announcement.

Australian analysts have said, however, that it is too early to know the full extent of the impact on the $13 billion a year coal industry.

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