Tokyo proposes trimming its next-generation ship fund as ammonia trials lengthen

The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) has put a revised plan for its Green Innovation Fund "next-generation ships" project out for comment. The draft lowers the cap on national funding to ¥40.58bn from ¥40.88bn, reflects the end of the N2O reactor effort and adds money for longer trials of a large ammonia-fuelled ship. The consultation is voluntary, not a statutory procedure. It opened on 5 November 2026 and closes at 6pm on 5 December.

What stops

The plan's budget footnote says development of an N2O reactor for the ammonia-fuelled ship has ended. N2O is a by-product of burning ammonia, and the plan puts its warming effect at about 300 times that of CO2.

MLIT's briefing slides say the reactor was to be fitted to the ship and demonstrated as a set, with the demonstration voyage's ammonia fuel costs booked to the reactor project to avoid double subsidy. After the reactor project's implementation was reworked, it will not do an onboard demonstration; the slides date that decision to a January 2026 NEDO committee. The plan deducts about ¥620mn from project costs, after netting out about ¥680mn spent before the effort ended.

What expands

The large ammonia-fuelled ship is due to be completed in November 2026, with a three-month demonstration voyage starting straight afterwards. The slides say operation of an earlier ammonia-fuelled tug showed that three months is too short to surface problems. On the tug, the housing that holds the catalyst vibrated more than expected and developed a durability problem, so its support structure was reinforced, and frequent nitrogen-cylinder changes burdened the crew. On the new ship's sea trials, engine vibration and noise were severe enough to hurt working conditions, and vibration-damping material was fitted between engine and hull.

The draft adds two things. The first is a one-year-and-three-month period of ammonia use, aimed at tracking catalyst changes, extending maintenance intervals and improving the engine and hull together. The second is support for ammonia fuel costs, measured as the price gap against heavy fuel oil, with about 960 hours of ammonia sailing as a guide, to be agreed with the charterer. The slides say the IMO's postponed vote on its greenhouse-gas rules has weakened charterers' incentive to burn ammonia. IMO talks are due to resume in December 2026.

The money and the contractors

The additions carry a total project cost of ¥816mn. National funding is capped at ¥490mn, at a one-half subsidy rate plus a 10% incentive. No open call is planned. The contracts of four existing contractors would be amended: a shipping line, an engine maker, a second engine business and a shipyard, whose project period would run through the fiscal year starting April 2027. The contractors are named in Japanese in the source.

The table below sets out the proposed ceilings by item. The slides name only the ¥490mn addition and the ¥620mn deduction as drivers of the project-total change. They give no reason for the lower hydrogen and LNG ceilings, which sit in a table that marks both items as having no plan change.

This is a consultation draft, not a final funding decision.