Many industrialized countries will start the process of ratifying the Kyoto Protocol on the basis of the outcome of the negotiations at the Sixth Conference of Parties in The Hague, in November 2000. Policy-makers in most of these countries will face domestic hurdles including the trade-off between political commitments and economic realities. The Japanese government (host to the Kyoto negotiations) is facing a serious problem in meeting its targets, because of the Tokaimura nuclear disaster and resulting unwillingness to expand nuclear capacity. This report analyses the specific conditions for Japan, covering various scenarios for additional policies such as fuel switching, carbon taxation and emissions trading, within the context of a liberalizing energy market. It also speculates on the future of the Kyoto regime itself.