TOKYO — On a recent Sunday afternoon at Japan’s top university, a building full of students and recent graduates was buzzing about climate tech.

A panel of executives and company founders debated funding mechanisms for startup companies in front of a full auditorium. In another space, participants filled rows of temporary chairs to watch presentations on sustainable investment. Between the two, a “networking zone” brimmed with dozens of students, corporate analysts, professors, even a local politician, furiously swapping business cards.

Rising concern about climate among Japan’s youth combined with a burgeoning enthusiasm in traditional corporate Japan for clean technologies has led to a new focus on venture capital and startups. The startup scene is a new element of potential change in Japan’s efforts to jump-start an energy transition.

“Young people are interested now. In just a few years it’s become a very hot topic,” said Akira Fujii, a 41-year-old elected councilman from Machida City, a suburban enclave on Tokyo’s fringes, as he mingled among hundreds of students and graduates at Tokyo University, an institution with a stature a little like Harvard, Princeton and Yale universities all rolled into one.

To those steeped in the venture capital culture of the United States or even Europe, a youthful crowd debating climate finance on a weekend might not seem so exceptional. But it reflects an astonishing shift within just one generation since the 1990s.

Japanese startup funding has grown rapidly over the past decade, reaching 877 billion yen (about $5.8 billion at current exchange rates) last year, according to government statistics. Though that tapered off in the first half of this year as the global VC industry stalled in the face of higher global interest rates, there’s still been a nearly ten-fold expansion of the industry in Japan in less than a decade.

While the industry is still tiny compared to the size of the venture capital industry in the United States or the European Union overall, it’s now on par with other major industrialized countries such as France or Germany.  Cleantech startups were the third most active sector in the Japanese VC industry in the first half of this year, up from sixth last year, according to INITIAL, a consultancy that tracks the industry.

Back in the 90’s when I was living in Japan and working for The Wall Street Journal, I wrote a story about a young executive, Yoshito Hori, who left old-line trading company Sumitomo Corp. to launch his own startup company, a business school he called GLOBIS University. The school touted a unique curriculum focused on entrepreneurship.

In those days, voluntarily leaving the comfy confines of corporate Japan was heresy. Hori’s move stunned his colleagues, college classmates and even his parents. The Wall Street Journal considered Hori’s move — the sort of thing routinely celebrated in Silicon Valley by this time — so unusual in the context of Japan’s hidebound salaryman culture that my New York-based editors splashed the story on page one.

Flash forward a quarter century and not only is GLOBIS flourishing, but Hori is also running venture capital funds of his own.

“There is a lot more venture capital money around, including independent investment firms with real capabilities and numerous angel investors who have made money in startups,” Hori told me in a recent catch-up decades after we first met. “The best and the brightest are eagerly wanting to become entrepreneurs.”

Despite decades of economic stagnation, Japan remains among the largest industrialized economies in the world, as well as the world’s fifth largest greenhouse gas emitter. While the country has excelled in energy efficiency — a necessity for a nation that imports nearly all its energy — Japan is now turning its attention to innovative decarbonization strategies such as hydrogen and carbon capture.

“Energy efficiency used to be the focus, but that game is totally changing,” said Hiroaki Izuma, a former executive in Japan’s gas and utility industry who has also worked extensively with startup companies in Silicon Valley.

Climate and sustainability startups are taking on a more prominent role in Japan than in the past. They’re carving out a small but significant niche as they receive new backing from the government and forge links with traditional corporate Japan — which while chastened by two decades of retrenchment still has very deep pockets.

“Almost all venture capital has a connection with Japanese corporates,” said Noriya Tarutani, deputy director general with the innovation division of the Japan External Trade Organization, a government business promotion arm that has increasingly focused on startups in recent years.

EX-Fusion, a startup working on nuclear fusion, counts among its investors the venture capital arms of old-line corporate names like Mitsui, Sumitomo and Mitsubishi’s groups of companies. Tsumbame BHB, a startup developing an inexpensive way to make carbon dioxide emissions-free ammonia, has received backing from Japanese food and chemicals giant Ajinomoto Co., as well as the government’s Japan Science and Technology Agency, the Sumitomo Mitsui Trust Bank and the Development Bank of Japan. Pale Blue, which makes water-based propulsion systems for satellites, has received funding from a venture capital arm of Mitsui Sumitomo insurance giant.

In a way, official Japan — both leading government ministries and corporations — have made an about face, now seeking out and investing in startups to diversify and encourage new thinking. These infusions of investment are, in turn, critical to the climate and energy startups. They provide help at early stages and patient investors that can provide larger chunks of capital.

That model can be an advantage compared to the more freewheeling system in the U.S. In the states, the model is built on investors, or limited partners, who seek huge gains relatively quickly. Japan’s model, in contrast, more closely resembles the industrial strategy approach the U.S. government is now enacting through the U.S. Energy Department’s loan office as part of the 2022 Inflation Reduction Act.

“That’s the uniqueness of the Japanese startup ecosystem,” Koichi Masuda, who worked at a successful U.S. startup and Google Japan before becoming chief revenue officer at EX-Fusion. “You let the money flow in from major corporations, which have the money. Trying to duplicate the limited partner system like in the U.S. would be crazy. They have a very different return on equity metric that’s significantly higher.”