Driven by a strong demand in Germany and other European countries, the Japanese solar industry is expected to grow 30 to 40 percent a year, with a focus on exports. Annual market demand for Japan's photovoltaic equipment industry in fiscal 2008 will be 2,350,050 kilowatts (367 percent of the 2004 level) based on the shipment in terms of power generation capacity, according to a report by Yano Research Institute Ltd. As part of the firm's extensive study on new energy system markets, this 2005 report on solar photovoltaics was compiled based on interviews with manufacturers in the relevant fields, statistics, questionnaires and other data collected between April and June 2005.

The total capacity of the photovoltaic (PV) cells and modules shipped in fiscal 2004 including exports was estimated at 640,136 kilowatts. The market for residential solar power systems, the primary applications of photovoltaics, reached 359.5 billion yen (about U.S.$3.07 billion) in fiscal 2004, with 58,600 units installed, the report said. Of all the residential systems installed in fiscal 2004, 80.6 percent were for existing homes.

The report predicts that PV systems for existing homes will continue to lead the market. In fiscal 2008, the number of units installed is projected to reach 147,600 (252 percent of the 2004 level), which will be worth 698.9 billion yen (about U.S.$5.97 billion), or 194 percent of the 2004 level. Specifically, 457.5 billion yen (about U.S.$3.91 billion) is for new homes and 241.3 billion yen (about U.S.$2.06 billion) for existing homes, both of which will represent 185 percent and 215 percent of the 2004 levels, respectively.

The use of PV systems in the public sector was also surveyed through questionnaires sent to municipal governments. Of 242 respondents, 55.6 percent answered that they had "already installed one or more PV systems," while 23.2 percent replied that they "are considering the introduction of new or additional PV systems." When asked about the purpose of new/additional installation (multiple choices allowed), by far the largest number of respondents (91.4 percent) cited "environmental education and awareness promotion," followed by "reduction in carbon dioxide emissions" (74.1 percent) and "energy savings" (63.8 percent). The intended installation sites were "school buildings" (51.7 percent), "municipal office buildings" (22.4 percent), "street lights" (10.3 percent) and others. These results show that the installation of PV systems on educational facilities is most likely to increase in the public sector.