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Anti-nuclear protesters demonstrate in Tokyo. Japan will join Germany as the second leading economy to turn away from nuclear power since last year’s accident at the Fukushima Daiichi nuclear power plant.

YURIKO NAKAO/REUTERS

Japan will phase out nuclear power by 2040, marking a big policy shift and the first formal decision to retreat from atomic energy since the disaster at Fukushima 18 months ago.

The plan, which was announced on Friday, is opposed by business groups and has been questioned by officials from the United States, Britain and France, and means Japan will join Germany as the second leading economy to turn away from nuclear power since last year's accident.

Tokyo's timetable is much slower than Berlin's, however. Angela Merkel, the German Chancellor, ordered half of her country's nuclear plants to be shut last year and pledged to replace the rest with renewable energy sources over the next decade. Japan's plan would give it almost 20 more years to accomplish the same goal.

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Japan's decision will reverberate through the energy and commodities markets. The phase-out of the world's third-biggest nuclear generator will mean lower demand for uranium, but higher consumption of commodities, including crude oil, thermal coal and liquefied natural gas over the long term.

The Japanese move could also have a huge impact on the way nuclear energy is perceived in the world.

"The fact that one of the major nuclear countries is pulling out will not help the industry at all internationally – people will ask why," said Daniel Grosvenor, head of Deloitte's nuclear team in Britain. "Many countries took a pause after Fukushima, and they might do so again."

Japan is the world's third-largest importer of crude oil, after the United States and China. The country is the largest importer of thermal coal, on a par with China, and by far the biggest buyer of liquefied natural gas, a form of supercooled natural gas shipped in huge vessels.

Uranium prices in the spot market had already fallen this week, to their lowest since October, 2010, in anticipation of the Japanese withdrawal from nuclear power. The cost of the most commonly traded form of uranium dropped to $48 (U.S.) a pound, down almost 10 per cent over the past year and 65 per cent since the record high set in 2007.

Samantha Dart, commodities analyst at Goldman Sachs in London, said in a note to clients that the increasing outages in nuclear power generation in Japan had lent "exceptional" support to alternative fuel sources, such as LNG and crude oil. The move to phase out nuclear power would exacerbate the trend, analysts said.

The greater-than-expected reliance on hydrocarbons to generate electricity would also push the giant Japanese trading houses, or sogo shosha, to invest in natural gas, crude oil and coal production assets overseas to secure supplies, industry executives said.

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Mitsubishi Corp., the largest soga shosha, has already been investing heavily in natural gas over the past year. Industry executives said that other sogo shosha, such as Mitsui & Co. Ltd., Sumitomo Corp., Itochu Corp. and Marubeni Corp. were likely to follow suit with investments overseas.

Before the Fukushima disaster, Japan derived about 30 per cent of its electricity from nuclear power, and its previous long-term energy strategy had called for the ratio to be increased to as much as 50 per cent by 2030.

Under the new policy, the country's 50 remaining reactors, which were built between the early 1970s and 2006, are to be shut once they reach an operating lifetime of 40 years, and no new reactors will be built.

"Every policy resource will be brought to bear to make it possible to have zero nuclear power plants in operation by the 2030s," the strategy document released on Friday stated.

Setting a target for phasing out nuclear power could make it easier in the short term to restart plants that have been idle since the accident. In the absence of clear national directives, local politicians have taken Japan's nuclear policy into their own hands by blocking the restart of reactors closed for safety inspections. Today only two reactors at one facility are operating.

The new energy strategy calls for reactors to be restarted if a newly reorganized national atomic regulator deems they are safe.

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Polls suggest about half of Japanese voters favour abandoning atomic power, compared with between one-quarter and one-third who support some degree of continued use.

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