The solar market in Japan keeps weakening. Such a sluggish market demand directly impacts on financial performances of leading companies Panasonic and Kyocera. Both companies reported solar-related decreases in their financial results for the fiscal year 2016 (ended in March 2016).

Panasonic: residential solar market was flat

Panasonic reported a 3% fall in sales in the Eco Solutions business, which includes the solar business, to JPY 1.61 trillion. Panasonic blames the sale decrease to “sales decrease in solar photovoltaic systems for house-use in Japan.”

Also pointed in the reported is that the segment profit has fallen 18% to JPY 78.4 billion compared to FY2015 – due to the same reason to the sale decrease.

Panasonic has been focusing on producing high-efficiency PV products such as HIT® modules for the residential and small-scale commercial PV systems. To improve its consolidated financial performance, Panasonic would strengthen its investment in automotive and battery storage businesses.

Kyocera: solar business declined

Kyocera’s Applied Ceramics Division met revenue drop majorly due to “revenue decrease of solar-related businesses,” according to its financial report for FY 2016.

Kyocera Solar is contained in the Applied Ceramics Division, which met a revenue fall of 11% down to JPY248 billion in 2016. Although Kyocera saw a rapid growth in sales in the U.S. market, the Division revenue was still influenced by domestic decline.

Operating margin for the Applied Ceramics Division improved to 6.6% because of the company’s credits cost-cutting measures, yet it is unclear if this were related to Kyocera Solar’s business.

Kyocera is not optimistic about Japan’s solar market in near future. It has already launched energy storage business to improve its business.

Lower FiT impacts on demand

The Japanese government has made a Feed-in Tariff (FiT) scheme policy that will slash the subsidies for solar PV systems year by year since 2012. For the fiscal year 2016, the FiT subsidy for PV systems under 10kW is JPY 33 – relatively high in the world. Nonetheless, the falling FiT subsidies cause the weakening trend in the Japan solar market because the PV system cost in the country is high.

The domestic PV module shipment hit a record in the first quarter of 2015 followed by quarterly and monthly decreases, found JPEA.

Furthermore, in late 2014, some regional power companies denied to connect PV power plants to their power grids because the grids were almost overloaded. Such an issue directly impacted on PV power plant’s IRR, reducing willingness for investors to put their money in the solar business.

So far, more than 70% of PV projects approved since 2012 are still under suspension due to problems about constructions, contracts, or grid connections.

The Japanese Government has introduced many measures to tackle the problems. However, as the market demand is shifting from large-scale PV plant to small-scale residential/commercial systems, it is predicable that the Japan solar market will go weak in recent years.