How to Read Japan’s Offshore Wind Market
Japan’s offshore wind market has attracted rapidly increasing attention over the past few years. Government targets, the development of auction frameworks, and the entry of both domestic and international players make it look, on the surface, as though “the market is taking off.” At the same time, however, project stagnation, withdrawals, and a more cautious tone in investment decision-making have progressed in parallel—meaning the reality of the market is far from straightforward.
The reason for this sense of mismatch is that Japan’s offshore wind market is not being driven by a single factor. Technology, policy, the investment environment, cost structures, the supply chain, and demand-side requirements are intertwined, and together they determine both the speed and direction of market development. If you isolate only one of these elements, you cannot understand the market as a whole with accuracy.
In this Pillar article, we will not frame Japan’s offshore wind market as a binary question of “growing or not growing.” Instead, we will organize it structurally—which conditions are pushing the market forward, and which conditions are acting as brakes.
For a broader, high-level view of how offshore wind is positioned in Japan— including comparisons with other power sources—please refer to the article below.
👉 Why Offshore Wind in Japan Is Not “Easy”: A Structured View of the Constraints
Where Japan’s Offshore Wind Market Stands Today (2025)
Japan’s offshore wind market in 2024–2025 is often described as having “entered an expansion phase.” In reality, however, the market is closer to a plateau. While the number of projects has increased, not all of them are moving forward smoothly; we are seeing repeated revisions, delays, and profitability re-evaluations.
The government has set mid- to long-term deployment targets, and the institutional framework has been built out to a certain extent. On the other hand, developers’ and sponsors’ investment decisions have clearly become more cautious than before. This does not mean “the market has failed.” It is more appropriate to view the current phase as a stage in which early expectations are being reconciled with real-world conditions.
One factor creating this gap is the difference in time horizons between policy targets and implementation conditions. Policy draws deployment volumes on 10- or 20-year horizons, while individual projects must form a credible path to investment recovery within only a few years. This mismatch affects the overall pace of the market.
Offshore wind is also often discussed under the assumption that “once it starts moving, it accelerates through scale and learning effects.” In Japan, however, physical constraints—ports, construction, and supply chain capacity—are strong, and the structure does not necessarily allow linear expansion. As a result, differences between projects widen, and we see a situation where “projects that move forward” and “projects that stall” coexist at the same time.
This “plateau” should be understood not as an issue of any single project, but as part of the market’s maturation process as a whole. In practice, progress varies by domain, and we observe different dynamics in the supply chain, policy, and on the demand side.
The recent state of Japan’s market—organized through the lenses of policy, industry, and investment—is addressed in the following articles.
👉 Japan’s Offshore Wind Market: Strategic Positioning as of 2025
👉 How Far Has Japan’s Offshore Wind Supply Chain Progressed?
Why Investment Capital Has Become More Cautious
To discuss Japan’s offshore wind market, you cannot avoid the behavior of investment capital. On the surface, interest in ESG investing and the energy transition remains high, and offshore wind continues to draw attention as an “investment theme.” Yet when you look at actual investment decisions, a more cautious stance stands out compared with earlier phases.
Behind this is not only rising interest rates or changes in the macroeconomic environment, but also a re-evaluation of the risk structure specific to offshore wind. In Japan in particular, institutional change risk, political statement risk, and natural hazard risk overlap, and future cash flows tend to be assessed as highly uncertain.
From the perspective of overseas investors, Japan is perceived as “a market with large growth potential, but one where the rules are still being redesigned.” This is an opportunity, but also a reason to be cautious about entry timing. Capital that prioritizes short-term returns tends to strengthen a wait-and-see posture.
Political statements and geopolitical conditions are also not negligible. Negative remarks about renewable energy policy in specific countries or regions can affect investor sentiment even without direct institutional changes. The fact that the global investment environment itself influences the evaluation framework is becoming more important than ever, separate from Japan’s domestic policy & regulatory framework.
As a result, Japan’s offshore wind market has entered a state where “capital exists, but it does not come in unconditionally.” This is also an unavoidable phenomenon in the process of market maturation. Going forward, projects will likely be selected more strictly—only those that can clearly demonstrate which risks are manageable and which risks remain structural will be able to attract capital on viable terms.
What investors are looking at is not “market size” itself, but rather how controllable the risks are. This evaluation axis is influenced not only by individual projects, but also by national policy & regulatory framework and political messaging.
In fact, changes in investment stance toward Japan have become visible through specific news and statements. The following article organizes a representative case.
👉 How Do Political Risks Abroad Affect Offshore Wind Investment in Japan?
In addition, the strategic question of how investors and developers should engage with Japan’s market is organized in the article below.
👉 How to Think About Investment Strategies in Japan’s Offshore Wind Market
How Cost and Profitability Constrain the Market
The biggest reason Japan’s offshore wind market looks “institutionally advancing” while investment and development are becoming more cautious is that the balance between cost and profitability remains difficult to make work. This is not a temporary cost spike; it is a constraint rooted in the market structure itself.
Offshore wind is often understood as “getting cheaper as scale increases.” In Japan, however, this premise does not fully hold. The reason is that CAPEX, OPEX, and financing costs each have a structure that makes them difficult to decline simultaneously.
CAPEX: Large Scale, But Heavy Fixed Costs
In Japan’s offshore wind projects, CAPEX has not fallen as much as expected, even as turbine sizes and project scales have expanded. A key driver is that the cost share of items dependent on local conditions—such as foundations, construction, ports, and grid connection—is relatively high.
In particular, constraints in port functions and narrow weather windows for offshore operations increase not only direct costs but also contingencies that incorporate schedule delay risks. This is difficult to absorb through design or procurement ingenuity alone, and it tends to remain as a “structural cost” specific to Japan’s market.
OPEX: Some Improvement Potential, But Hard to Expect Step-Change Reductions
For OPEX, there is some room for improvement through remote monitoring, drone inspections, and more sophisticated O&M structures. However, given Japan’s weather and sea-state conditions, it is not realistic to reduce costs by cutting safety margins.
As a result, OPEX tends to improve gradually, but “not enough to decisively push down LCOE.” When CAPEX remains elevated, it is difficult to restore bankability through OPEX improvements alone.
Financing Conditions and IRR: The Biggest Bottleneck
The harshest constraint in Japan’s offshore wind market is the question of whether IRR can be made viable under the financing conditions. When CAPEX and OPEX remain above certain levels while power prices or policy & regulatory framework revenue are effectively fixed, IRR is structurally compressed.
In addition, uncertainties such as typhoons, earthquakes, and construction delays are reflected in a higher WACC and increased insurance costs. This cannot be eliminated by individual developers’ efforts, and it creates a market-wide tendency for “risk premiums to stay high.”
As a result, even if it appears that “generation costs are declining,” IRR may fail to clear investment thresholds, and projects do not proceed.
What Withdrawal Cases Revealed
This structure is clearly reflected in corporate decisions. Representative examples include cases in which companies were forced into withdrawals or strategic shifts in offshore wind. These should not be read simply as management choices, but rather as outcomes where the market structure did not allow the project economics to hold.
Similarly, as shown by analyses of Round 1 withdrawals, it is often not the auction framework itself but the costs and risks that become visible after award that make continuation difficult.
These cases demonstrate the danger of evaluating the market only on expectations such as “costs will go down in the future.”
For more concrete numerical analysis and a breakdown of withdrawal drivers, the following articles provide detailed coverage.
👉 Why Did an Offshore Wind Business Exit Happen? A Profitability Structure Analysis
👉 The Gap Between the Auction System and Project Economics: Lessons from Round 1 Withdrawals
Cost and profitability cannot be solved in isolation. Unless policy & regulatory framework, technology, the supply chain, and finance improve together, the market will only move forward partially. In the next section, we will organize why—under these constraints—floating offshore wind is coming back onto the agenda, from a market-context perspective.
Why Floating Offshore Wind Is Emerging as a Market Theme Again
Against the backdrop of cost, construction, and policy & regulatory framework constraints facing fixed-bottom offshore wind, floating offshore wind is re-emerging in Japan as an important market theme. This is not because “the technology has matured” in a simple sense, but because the structure has become clearer that the market will hit a ceiling if it relies on fixed-bottom alone.
In other words, floating offshore wind is not being discussed “because it is next-generation technology,” but rather because it is being re-evaluated as a realistic alternative option to constraints that cannot be solved through incremental extensions of today’s model.
The Physical and Structural Limits of the Fixed-Bottom Market
In Japan’s surrounding waters, the depth range where fixed-bottom offshore wind can be applied is limited. Moreover, many of those areas simultaneously face constraints related to fisheries, port usage, and visual considerations, making the gap between “theoretical potential” and “deployable potential” increasingly visible.
In addition, elements such as installation vessels, ports, and grid infrastructure tend to create competition across projects, and simple efficiency gains through scale are difficult to realize. As a result, the scenario of sustainably expanding Japan’s market through fixed-bottom alone is confronting real constraints.
Floating Is Not a “Cost Reduction Measure,” but a “Spatial Expansion Measure”
Floating offshore wind is often framed as “promising if costs come down in the future.” In a market-context sense, however, it carries an even more important meaning: it can expand the usable sea area itself.
Accessing deep-water areas that fixed-bottom cannot reach, and using sites further offshore, is not merely about adding more capacity. Floating is positioned as an option that can potentially ease multiple bottlenecks at once—social acceptance, spatial constraints, and transmission planning.
A “Second Option” That Surfaces During a Market Plateau
When a market is expanding smoothly, both developers and investors prioritize lower-risk established technologies. But when a market plateaus and growth along the existing extension becomes unclear, alternative options become practical decision items for the first time.
Japan’s market is now approaching exactly this stage. As fixed-bottom project formation becomes more cautious, floating is being re-evaluated—on both the policy side and the developer side—as “an option to connect to the next phase.”
However, Floating Is Not a “Universal Solution”
It is important to recognize that floating offshore wind is not a universal solution that automatically resolves fixed-bottom challenges. Floating comes with a different cost structure, different construction constraints, and different financing risks.
That is why the background behind floating’s re-emergence as a market theme includes cautious realism alongside expectations. Most market stakeholders do not think “floating solves everything”; they view it as a “conditional option” that can complement the limits of fixed-bottom.
Expectations for floating wind are high, but implementation comes with conditions even more severe than fixed-bottom. According to the latest FLOWRA report, mounting a 15MW turbine brings the total floater weight to 20,000 tons, demanding extreme ground bearing capacity and vast yard space.
We analyze these “heavy industry” constraints and the infrastructure strategies needed to solve them in the deep-dive article below.
👉 The Shock of the “15MW Era”: Port Scaling and Integrated Operations
If you evaluate floating without properly understanding this, it can lead to excessive expectations or incorrect investment decisions.
On why floating offshore wind is re-emerging now in a market context, the following article organizes the background.
👉 Why Now: Floating Offshore Wind in Japan—Market and Policy Context
In addition, understanding the deployment phase of floating offshore wind globally is useful for avoiding excessive expectations.
👉 Floating Offshore Wind: Global Trends and What They Mean for Japan
In the next section, building on this renewed attention to floating, we will organize how far the supply chain and execution capability can support market expansion.
Supply Chains and Execution Capability Will Decide the Market
The largest factor that will determine Japan’s offshore wind market—especially its future growth potential—is not demand or policy targets, but rather whether supply chains and execution capability can respond to reality. Behind the lack of market acceleration is a structural gap: “plans exist, but execution is not possible.”
This issue is common to both floating and fixed-bottom, but it becomes especially visible in offshore wind projects where scale is large and processes are complex. In such systems, supply chain fragility tends to emerge as a market-wide bottleneck.
The Challenge Is Not “Capacity,” but “Execution Capability”
Japan has foundational industries—shipbuilding, steel, heavy industry, and construction—and therefore is often evaluated, on the surface, as having “high potential” for offshore wind supply chains. In reality, however, a key issue is that dedicated mass-production systems and accumulated execution track records for offshore wind remain insufficient.
Some companies can respond to one-off orders or prototype levels. But when you move to continuous production, schedule control, and quality assurance under a GW-scale program, the number of players that can truly deliver becomes limited. This gap is hard to see at the planning stage, but it becomes visible at the execution stage—and it can materially determine the speed of the market.
A Symbolic Case: A Blade Accident (Onshore Wind)
A symbolic case that exposed supply chain fragility was a blade drop accident at an onshore wind power facility in Akita Prefecture. While this accident occurred in onshore wind rather than offshore wind, it is a highly instructive case for understanding structural supply-chain risks shared across large-scale wind turbines.
What this case revealed was not merely a quality defect or an isolated trouble. Its essence lies in the fact that the risk structure—unique to wind equipment where multiple processes are tightly coupled—became visible through the accident: blade manufacturing, long-distance transportation, on-site installation, and final inspection all must function as a highly integrated chain.
As blades rapidly scale up, a problem in any single element—manufacturing hubs, transport routes, port and temporary storage facilities, or installation precision—can halt an entire project. This should be viewed not as a problem of a specific operator or a single job site, but as a structural challenge stemming from insufficient accumulated experience in reliably implementing large equipment at the market level.
👉 What the Akita (Araya) Blade Incident Revealed About Supply-Chain Risks
Ports and Construction Capability Put a Ceiling on Scale
In offshore wind—especially floating—port functions and construction capability effectively determine the upper limit of market scale. Ports that can support assembly, storage, load-out, and tow-out of large components are limited, and repurposing existing ports requires both time and investment.
On the construction side, constraints such as specialized vessels, mooring and installation know-how, and access to workable weather windows overlap. As a result, the ability to build to plan itself becomes a scarce resource. This creates a paradox: the more projects are added, the more competition emerges, and the slower the market can become overall.
A Realistic Balance Between Overseas Reliance and Localization
At present, Japan’s offshore wind supply chain is in a situation where it must rely on overseas players for key components and construction know-how. In the short term, this is a rational choice, but it also imports uncertainty driven by external factors into the market.
At the same time, it is not realistic to achieve full localization within a short period. From a practical perspective, what matters is strategically separating which processes should be handled domestically and which should be outsourced. If this judgment is mistaken, it can trigger both cost escalation and schedule delays.
The overall progress and challenges of the supply chain are organized in the following article.
👉 How Far Has Japan’s Offshore Wind Supply Chain Progressed?
Supply chains and execution capability determine the speed of market growth independently of policy targets or investment appetite. In the next section, we will organize what strategies investors and developers can take under these constraints.
What Investors and Developers Should Do (A Strategic Fork in the Road)
Japan’s offshore wind market is now shifting from an “early-entry phase into a growth market” to a “turning point where strategies must be selected.” Looking only at the number of projects or policy targets, there still appears to be room for growth. But at the practical level, the reality is that this is no longer a phase where every player can take the same strategy.
What matters at this stage is not aligning oneself with an optimistic market-wide growth scenario, but rather clearly separating strategies based on one’s own position and risk tolerance.
Strategies Have Already Diverged
In today’s Japan market, the behavior of investors and developers is beginning to split in three major directions.
- Players who continue building pipelines and wait for the next institutional and market environment
- Players who narrow project size or scope of involvement and shift to selective participation
- Players who choose withdrawal or a temporary pause from a profitability and risk perspective
None of these strategies can be labeled simply “right or wrong.” Their rationality changes depending on how you assess changes in the market environment. The key point is not which strategy you choose, but whether you can clearly explain why you chose it.
The Biggest Divider in Investment Decisions Is “Visibility of Returns”
The factor most strongly separating investor and developer decisions is not LCOE or IRR as numbers, but rather how confidently those outcomes can be delivered.
In Japan’s offshore wind projects—both fixed-bottom and floating—there is large variability in construction costs, O&M costs, schedules, grid connection, and institutional change risks. The structure makes it easy for a gap to emerge between initial assumptions and realized outcomes. This uncertainty directly affects both the cost of capital and investment decisions.
Indeed, withdrawals and strategy revisions driven by economics can be seen as representative movements showing that the market is still immature.
Policy and regulatory framework Can “Support,” but They Do Not “Guarantee”
In Japan’s offshore wind market, the presence of policy and regulatory framework is often discussed as the foundation for investment decisions. Practically, however, policy does not guarantee project viability; it only sets the conditions.
Looking back at past auctions and regulatory framework design, we can see that revisions to regulatory framework and assumptions have affected developers’ expectations. Policy risk does not become zero; rather, it continues to exist throughout the period before the market matures.
👉 What Round 1 Withdrawals Show About Policy & Regulatory framework Design and Project Risk
How to Design the Link to Demand-Side Electricity Procurement
Another element that has been growing in importance when thinking about market strategy is how to connect with demand-side logic, including RE100 and Scope 2 requirements. Beyond a pure generation business model built on FIT/FIP assumptions, how a project builds relationships with electricity consumers can broaden strategic options.
However, excessive expectations are not appropriate here either. Demand exists, but conditions related to price, supply stability, and contract duration are strict, and not all offshore wind projects will directly connect to these needs.
👉 RE100 and Japanese Companies: The Reality of Renewable Procurement from the Demand Side
👉 How Scope 2 Requirements Influence Investment Decisions
Relatedly, for how offsite corporate PPAs work in Japan, see the guide below.
👉 Offsite Corporate PPA in Japan: A Practical Guide
A Practical Market Strategy That Is Realistic
Based on the above, realistic strategies in Japan’s offshore wind market can be organized as follows.
- In the early phase, do not chase project count; participate only in projects where conditions are aligned
- Do not take technology risk, construction risk, and institutional risk at the same time
- Design strategy in advance with withdrawal or downsizing as a feasible option
This may look overly conservative. But in a market that is still in a pre-maturity stage, there are many situations where the value of not failing is higher than the value of forcing early leadership.
For investors and developers, the key question is not “Will Japan’s offshore wind market definitely grow?” but rather “Under what conditions will I move, and to what extent?”.
In the next section, we will summarize—based on the market, cost, supply chain, and strategy points organized above—how Japan’s offshore wind market should be positioned.
Conclusion: Where Is Japan’s Offshore Wind Market Heading?
In this article, we organized Japan’s offshore wind market not through “policy targets” or “deployment projections,” but through implementation-side lenses such as market structure, cost, supply chains, and investment behavior. What emerges as a result is the reality that Japan’s offshore wind market has entered a stage where it cannot be described through a binary of growth versus stagnation.
For fixed-bottom offshore wind, it is becoming clearer that expansion will not be as simple as previously assumed, given physical constraints, construction capability, and project economics. Meanwhile, floating offshore wind may open new sea space through deep-water deployment, but it comes with a different cost structure and different execution constraints. Neither route represents an “easy growth path.”
In addition, supply chains and port/construction capability—which have been treated as prerequisites for expansion—are not in a state where they can automatically keep pace with demand growth. Instead, we have entered a phase where execution capability itself defines the ceiling of market growth, and the difference between “having a plan” and “being able to execute” is becoming more important than ever.
Under these conditions, strategies among investors and developers have already diverged. The phase where everyone continues forward investment is over, and choices such as waiting for conditions to align, limiting scope of involvement, or withdrawing have become sufficiently rational options. This is not market failure, but an adjustment process typical of a pre-maturity stage.
What matters is neither treating Japan’s offshore wind market as “a growth industry that must succeed,” nor discarding it as “a field with no future.” What is required is a calm perspective to judge under what conditions it becomes viable, and within what scope.
Going forward, the market is more likely to form not through uniform nationwide expansion, but through step-by-step formation starting with areas, projects, and players where conditions are aligned. In that process, reproducibility will be prioritized over project counts, and certainty over speed.
DeepWind will continue to frame Japan’s offshore wind market not as “expectation,” but as “structure,” and will continuously organize implementation issues that cannot be seen from surface progress metrics or headline figures alone. This Pillar article is intended to function as a shared thinking framework for evaluating the market.
Weekly digest with actionable insights for investors, developers, and stakeholders in Japan’s offshore wind. 🎁 Welcome gift: Japan Offshore Wind – 2025 Recap & 2026 Outlook (PDF) Japan’s offshore wind is no longer constrained by ambition — but by viability.📩 DeepWind Weekly
📘 DeepWind Premium Report
A decision-oriented report synthesizing commercial viability, cost/revenue misalignment, supply-chain constraints, and Round 4 implications.
View the report (Gumroad)
- 🔍Market Insights – Understand the latest trends and key topics in Japan’s offshore wind market
- 🏛️Policy & Regulations – Explore Japan’s legal frameworks, auction systems, and designated promotion zones.
- 🌊Projects – Get an overview of offshore wind projects across Japan’s coastal regions.
- 🛠️Technology & Innovation – Discover the latest technologies and innovations shaping Japan’s offshore wind sector.
- 💡Cost Analysis – Dive into Japan-specific LCOE insights and offshore wind cost structures.
