Japanese companies have been engaged in carbon trading on a voluntary basis, through the so-called Green Transformation (GX) League, since 2023. Legislation passed in late May made mandatory the carbon market component of Japan’s wider GX agenda – which includes other climate policies like fossil fuel surcharges and green bonds – such that hundreds of Japanese companies will be subject to compliance obligations under a national cap-and trade programme from April 2026. Considering Japan’s focus on project-based credits through its JCM program, we anticipate that offsets will be a key component in the mandatory phase.