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Iwatani bets on investments and research to lead the charge toward a hydrogen society

Interview - July 5, 2024

In this interview for The Worldfolio, Mr. Hiroshi Majima, President of Iwatani Corporation, discusses Japan's energy mix, his company's plan for the creation of a hydrogen society, and shares insights into the recent stake taken in Cosmo Energy.


Current global policies, like the US Inflation Reduction Act, are pushing corporations to diversify their supply chains to enhance reliability and mitigate country risks. Japan is recognized for its reliability, advanced technology, and a currently weak yen, making it a cost-effective option. This situation has led industry experts to argue that the current period represents an opportunity for the Japanese to expand their global market shares. Do you agree with this assessment, and what advantages do you believe Japanese companies possess in this macroeconomic environment?

The essence of your question highlights a critical point: the Japanese yen is currently very weak. Despite this, the Iwatani Group has limited export products, which means we do not significantly benefit from the weaker yen.

Domestically, however, Japan is receiving considerable interest from foreign investors. A notable example is the partnership between TSMC and Sony to establish a new semiconductor fabrication plant in Kumamoto. The Japanese government is also actively supporting foreign investment, especially in the semiconductor sector. We perceive significant opportunities to supply our industrial gases and machinery in this context. Given the current economic conditions, we believe there is great potential to expand our operations.

In recent decades, there has been little movement towards establishing new production sites. However, the current depreciation of the Japanese yen presents an opportune moment. This devaluation has not only attracted investors back to Japan but has also encouraged Japanese companies to reconsider domestic production. I believe we are now entering a robust phase of domestic investment, marking a shift towards a more domestically-driven economy.

Despite this positive outlook, the Japanese industry faces two major challenges. First, our heavy reliance on imports, particularly for energy resources such as oil and liquefied natural gas (LNG), means that the weak yen adversely affects our production costs. Second, there is a significant labor shortage. Even if we expand our manufacturing capacity, the aging population poses a challenge in staffing these new facilities.


You mentioned that the devaluation of the JPY is attracting foreign investors to Japan, alongside other macroeconomic factors. However, the recent bullish run of Japanese equities is also due to internal factors, especially corporate governance reforms. In your view, what aspects of the Japan story are most compelling to foreign investors today? Additionally, how much of the recent economic growth can be attributed to these “internal” factors?

Your observation about the evolution of corporate governance in Japan is insightful and points to significant improvements over the past decades. Traditionally, Japanese companies tended to prioritize employees over investors, positioning the company itself closer to the employees. However, in recent years, there has been a noticeable shift towards greater investor interest among Japanese firms.

Historically, due to a certain stagnation and a general disinterest in dynamic asset management, substantial amounts of money remained idle in accounts. Recognizing this as a substantial issue, the government and stock exchange have taken steps to address it. This shift is evident in the impressive performance of the Nikkei 225, indicating that Japan is entering a new transitional phase.

Nevertheless, Japan faces challenges such as a labor shortage due to an aging and declining population, and rising import prices exacerbated by the depreciated yen, which in turn increases the cost of raw materials. Without adjusting prices, businesses risk becoming unprofitable. We are now seeing the beginning of this economic cycle's turn.

In terms of governance, there is a shift in focus; companies are increasingly aiming to reward shareholders, aligning more closely with US and European models. Additionally, considering the economic slowdown in China, investment attention that was previously focused on Chinese corporations and stocks is now starting to flow towards Japan."


Japan is facing what we call the Four-Fold Challenge which is a lack of domestic natural resources, a high dependency on the Middle East imports for energy, a high cost of energy, and a high cost to reduce greenhouse gas emissions. How do you believe Japan can overcome these challenges?

From the perspective of solar and wind energy, Japan faces significant geographical challenges. Although we are among the world leaders in solar panel installations, our limited land mass restricts further expansion of solar energy. The same is true for offshore wind generation. Despite exploring those various possibilities, the situation remains precarious. Considering this situation, nuclear power will be a crucial component of Japan’s energy mix.

The Fukushima Disaster in 2011 severely impacted the reputation of nuclear energy in Japan. However, given the current circumstances and Japan’s energy needs, nuclear energy will become increasingly vital, especially for initiatives like clean hydrogen production, which will depend on power generated from nuclear reactors. In recent years, we have seen a noticeable shift in both governmental and public perceptions towards nuclear energy.

Furthermore, Japan’s alliances with countries that supply natural resources are critical. Collaborations with Australia and North America in hydrogen and ammonia production are pivotal, and similar partnerships are expected with Singapore, Malaysia, and Indonesia.

In parallel with these initiatives, the main challenge will be to manage energy use and utilization during the current transitional phase. The government has allocated JPY 1 trillion to support the transition to a carbon-neutral society. However, if we focus excessively on green energy, high costs could place a significant burden on consumers and industries.

In practice, we are already procuring hydrogen, ammonia, LNG, and liquefied petroleum gas (LPG) for our clients in construction machinery and the automotive industry, including buses and trucks. Although we are meeting our clients' current needs, scaling production to match potential demand presents a formidable challenge."


Japan unveiled its vision for the creation of a “hydrogen society” back in 2017, a goal that is an integral part of your New Plan 27. The transition presents three major challenges: creating demand; transporting hydrogen, which requires maintenance at sub-200 degrees Celsius; and decarbonizing the hydrogen production process. Using fossil fuels for hydrogen production contradicts its eco-friendly purpose. As a key player in Japan’s hydrogen initiative, how is Iwatani addressing these challenges related to demand, transportation, and sustainable hydrogen production?

Addressing the demand aspect of your question first, even if Iwatani does not actively create demand, our clients, which include globally recognized companies, are already initiating such efforts. For example, Komatsu is converting to and developing products that utilize our hydrogen. I anticipate that demand will naturally increase over time.

Regarding transportation, which I believe pertains to international logistics, various countries are exploring different methods, including green methane. We are engaged in discussions about using liquified hydrogen as a transportation fuel. This initiative is not limited to Japan; Korean companies are also participating.

The third issue you mentioned concerns the generation of carbon-neutral hydrogen, which I foresee as the most challenging one. At the initial stage of the hydrogen society, demand for hydrogen grows daily. To successfully navigate the transitional phase, we must broaden our focus, remain realistic, and look beyond our ultimate objectives.

To give you an example: Iwatani is currently exploring methods to produce hydrogen from discarded plastics and convert biomass into gas for hydrogen production. While environmentally friendly, these methods are currently very costly, and the extent of government subsidies remains uncertain. Therefore, the practical measures we can immediately adopt involve addressing the conventional production of hydrogen and finding ways to offset the CO2 emissions generated during this process.


The automotive industry faces significant bottlenecks in the supply chain for lithium-ion batteries, with China controlling much of the market for raw materials. In response, industry experts believe hydrogen to be a promising alternative. Given Iwatani's involvement in hydrogen, could you share your perspective on the role of fuel cell vehicles in the future?

In terms of passenger vehicles, the penetration of fuel cell (FC) cars has not reached the levels anticipated by the government.

If we look at commercial vehicles, however, such as buses and trucks, national and regional governments, including Tokyo and Hiroshima, have been actively implementing strategic plans. I recently had the honor of participating in the opening ceremony for Hiroshima’s new bus and truck terminal. In alliance with Cosmo Energy, a company we are investing in, FC trucks are being added to existing fleets and there are more promising initiatives underway, particularly in promoting the use of hydrogen-fueled trucks within the Tokyo metropolitan area. These initiatives include the ambitious goal of having 20,000 trucks operational by 2030.


Iwatani and Cosmo Energy have collaborated on hydrogen projects in the past, and with the recent acquisition of 20% of Cosmo’s shares, your companies are poised to integrate more closely. This investment unites two of Japan’s historic comprehensive energy providers, positioning Iwatani at the forefront of the nation’s energy transition. From your perspective, what are the positive advantages and synergies you anticipate over the next two to four years as a result of this acquisition?

In March 2024, we successfully completed our acquisition of a 20% stake in Cosmo Energy. Over the past years, we have already developed a close partnership. Currently, we are in discussions about the specifics of our contract, and we are optimistic that it will be finalized by the end of April 2024.

This alliance with Cosmo presents several synergistic opportunities. Cosmo operates a substantial network of gasoline stations, and we have numerous hydrogen stations across the country. We aim to expand these energy resource stations in an integrated format. Additionally, we are exploring more sustainable energy options, including the production of SAF (sustainable aviation fuel) from sustainable sources, such as cooking oil. This process also produces propane and butane, necessitating measures to neutralize these gases. Furthermore, we are considering carbon capture and storage (CCS) initiatives to enhance our environmental impact.


Since the 1940s, Iwatani has pioneered hydrogen-based gases and has since evolved to establish four core business divisions: integrated energy, industrial gases, machinery, and materials. Could you provide a brief overview of your company's evolution and discuss any new business opportunities you foresee within these divisions?

The founder of Iwatani started the business with welding and cutting machinery as well as oxygen-based gases. He was also a pioneer in the industrial gases sector and was notably the first to import propane gas to Japan, which he packaged in containers suitable for use in hospitals. The necessity of selling these gases in steel cylinders led to the development of a specialized cell unit. This diversification and specialization paved the way for the current structure of our business divisions.

You mentioned four business divisions, but we are currently streamlining these into three main categories: energy, industrial gas & machinery, and materials. Interestingly, we have one historical service that falls outside these divisions: raising breeding. We are one of the only total pig breeding suppliers in Japan. By utilizing our diverse expertise, such as the use of propane to heat pig pens, we are capable of supplying comprehensive solutions;

A foundational principle of our company is the belief that our activities should promote a hydrogen society. Our founder held that the lower the carbon content in energy resources, the greener they would be, thereby positively impacting our environment. For example, compared to other fossil fuels, gas is preferable thanks to its lower carbon impact. However, hydrogen, which contains no carbon, is ideal for a greener society. Our founder not only recognized the potential of hydrogen but also of liquefied hydrogen, which has shaped our path to this day.

During the founder’s era, there were initiatives to use liquefied hydrogen in rocket launches. Our current chairman, Mr. Makino was present at that time, and already considered liquefying hydrogen to make transportation more feasible decades ago! This forward-thinking approach has driven our expansion plans, making us the top company in Japan to provide commercial liquefied hydrogen. It was through such innovative business practices and our founder’s insights that we expanded our operations widely. Currently, our focus is on integration, streamlining, and restructuring to achieve carbon-neutral objectives. Each of our business divisions is now tasked with incorporating carbon neutrality targets into their operational strategies.

Under your new mid-term strategy, “Plan 27,” Iwatani seeks to achieve operating profits of 65 billion yen. To achieve this objective, the firm is set to invest more than 420 billion yen in key technologies, including decarbonizing technologies, new industrial sectors, and M&As. What are the most important factors in achieving the core targets of Plan 27?

The key focus of our investment and mid-term strategy is the realization of a society that utilizes hydrogen as a primary source of energy. Investing in such possibilities forms the core of our efforts. Currently, propane is predominantly used for residential purposes, while hydrogen is more commonly applied in industrial settings. However, I believe that soon, these two will converge and be regarded as similar types of energy sources. Combining hydrogen with LPG to serve not only as an energy source but also as a heating solution will be a crucial segment for investment. For our clients, we are demonstrating the feasibility of this combination through a proof of concept using piped gas. This test involves creating a solution composed of gas and 20% hydrogen with the expectation of reducing CO2 emissions by a corresponding 20%. This initiative aims to enhance the usability of hydrogen as an energy source. On top of showcasing this technology at the 2025 Osaka World Expo, our underground piping infrastructure built for the exhibition will also supply 100% pure hydrogen alongside hydrogen fuel cells.


Iwatani has business operations across all major continents and you also have numerous subsidiaries not only exporting or importing gas but also operating your material-based businesses as well. Could you provide us with an update on your international businesses as well as your recent acquisitions of both Aspen Air US and Nordic Mining ASA?

Nordic Mining ASA, a company specializing in titanium, is set to begin its export shipments for the fiscal year 2024.

We operated titanium and zirconium mines, whose production processes are entirely wind power generation-basis. This green production approach underscores our commitment to environmental sustainability as we prepare to supply and ship titanium internationally.

In North America, we recently acquired Aspen Air US. We believe that helium production will be a central component of our strategy in the region and we are currently developing a unique approach to expand our presence there.

Additionally, in Southeast Asia—specifically in Thailand, Malaysia, and Indonesia—we seek to introduce sustainable substitutes for refrigerant gases.


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