One of the now-forgotten goals of former Prime minister Suga’s administration was to reclaim Tokyo’s status as a global financial hub. Kishida, the new PM, will likely bring in his own set of targets, but he should include Suga’s lesser-known idea and marry it with one that’s better known – decarbonization.

Tokyo can become a global financial hub by taking the lead in green financing. It already has a track-record of companies pioneering new forms of bond issuance linked to emissions cuts and sustainability. This summer, the Bank of Japan started the world’s first central bank facility to reward banks for allocating cheaper credit to green borrowers.

Last month, the Financial Service Agency (FSA) said it will help the Tokyo Stock Exchange create a platform for investors and issuers to access information on green bonds, as well as set up a better scheme to certify green bonds.

These and other elements are in place. What’s missing is the big piece that only PM Kishida can provide. Unlike over a dozen other nations, Japan has yet to issue a sovereign green bond. That’s important because it would form a yield curve based on which more issuance by local governments and companies in Japan can follow.

A new Japanese sovereign green bond would unleash far greater capital inflows into the country’s energy transition than the government’s flagship ¥2 trillion Green Growth Fund. It would also offer ESG-conscious investors the assurance they need.

From an ESG perspective, no investor should be allocating to Japan for its continued buildout of coal-fired power capacity. To be in line with the UN’s Sustainability Development Goals, and global pension investors’ ESG considerations, Japan needs to signal its continued decarbonization commitment in line with the positive momentum created by the previous administration.

For Kishida, who’s voiced concern about Japan’s state debt levels, tapping into the global financial pool hungry for green investments should be too attractive to ignore.