Tokyo (Platts)--26Mar2008

A government-led council called for planting grasses such as Erianthus
both in Japan and Southeast Asia to produce 100,000-200,000 kiloliters/year
(628,980-1.26 million barrels/year) of cellulose-based ethanol at Yen 40/liter
($1.51/gallon) by 2015 for motor fuel use, Japanese government officials said
Wednesday.

The council, comprised of technology experts from the public and private
sectors, was launched in November 2007 by the Ministry of Economy, Trade and
Industry and the Ministry of Agriculture, Forestry and Fisheries to clarify
technological barriers to reducing the cost of cellulose-based ethanol.

Currently, cellulose-based ethanol can be produced at more than Yen
200/liter in Japan, well above the tax-inclusive price of regular gasoline at
around Yen 150/liter, the officials said. While acknowledging technological
barriers are keeping costs high, the Japanese government said it is willing to
support technological developments to produce cellulose-based ethanol at Yen
40/liter by 2015, one official said.

As a means to reduce production costs, the report called for planting
such grasses as Erianthus in Japan and also in countries such as Thailand,
Indonesia and Malaysia to produce roughly 100,000 kl/year each of
cellulose-based ethanol, the officials said.

Japan's latest initiatives are part of a government and industry
commitment made in May 2007 to promote fuel cells in the next generation of
automobiles, as well as build legal frameworks for biofuels.

Japan is moving towards the use of ethanol and ETBE, or ethyl tertiary
butyl ether, in line with the country's commitment to reduce its greenhouse
gas emissions by 6% from the 1990 level between 2008 and 2012 under the Kyoto
Protocol.

In April 2005, Japan also committed itself to consuming 500,000 kl/year
of crude equivalent in biofuels in the 2010-2011 fiscal year to help meet its
Kyoto commitments.