The Asian nation's Agency for Natural Resources and Energy has been working for over two years on long-term policy guidelines aimed at improving energy security for the resource-poor country.

The Ministry of Economy, Trade and Industry (METI) unit had concentrated on reducing Japan's dependence on crude oil - nearly all of which is imported and accounts for between 50% and 40% of total energy needs.

However, a new draft due out next month will be the first to specify a target for biofuel and GTL usage.

Analysts say that securing non-conventional energy, such as biofuels and GTLs, may be easier for Japan, the world’s third largest energy consumer, than going head-to head against China, the world’s second largest, to compete for involvement in conventional upstream oil and gas projects.

But introducing biofuels and GTLs will still leave Japan heavily dependant on imported energy.

Analysts add that Japan's 20% target looks too ambitious when compared to the European Union target of 5.75% biofuel content by 2010. However, they say the introduction of GTL fuels looks practical in the long term and it will encourage new global investments in Australia, Indonesia, and Qatar, which is set to have the world's first commercial GTL facility later this year.

Japan hosted the first demonstration of GTL fuel in a hybrid diesel bus last year - at the 2005 World Exposition at Aichi – when Shell International Gas supplied the GTL fuel for a shuttle bus operated by JR Tokai Bus Company.

GTL fuel is made from natural gas, is colourless, odourless and cleaner than conventional refinery-produced diesel fuel, and virtually free of sulphur and aromatics.

A significant number of trials around the world have confirmed it significantly reduces emissions of particulates and carbon monoxide.