A consortium led by Mitsubishi Corporation was selected by the government in 2021 to develop the three offshore projects as part of Japan's decarbonisation drive.
However, "the business environment for offshore wind power has significantly changed worldwide due to factors such as tight supply chains, inflation, exchange rates, and rising interest rates", the firm said in a statement.
Mitsubishi Corporation CEO Katsuya Nakanishi said costs had "swelled far more than we anticipated" in the wake of factors such as the Covid-19 pandemic and the Ukraine crisis.
"We concluded that establishing a viable business plan is not feasible," he told a news conference on Wednesday, describing the decision as "gut-wrenching".
Mitsubishi's withdrawal does not mean the project has been terminated, although a big question mark now hangs over its fate.
Japan declared in its energy policy approved this year that offshore wind power was a "trump card" in its drive to make renewables its top power source by 2040.
Offshore wind power is "forecast to occupy a good portion of our power source in the future as cost reduction is expected", the industry ministry's policy statement said in February.
It said it also promised large-scale business projects with ample employment opportunities.
"Our position remains unchanged that, for a country as resource-poor as Japan, wind power is an important electricity source," Nakanishi said.
"We will continue to promote a carbon-neutral society," he said.
Japan is the world's fifth-largest single-country emitter of carbon dioxide, after China, the United States, India and Russia, and is heavily dependent on imported fossil fuels.
Nearly 70 percent of Japan's power needs in 2023 were met by power plants burning coal, gas and oil -- a figure Tokyo wants to slash to 30-40 percent over the next 15 years.
Wind power is meant to account for between four and eight percent in the same timeframe, up from around one percent now.
"Japan was already on track to miss its 2030 renewable energy targets, and this development pushes the country further off course," BloombergNEF analyst Umer Sadiq said.
Uncertainties about nuclear power restarts mean Japan will need to rely on liquefied natural gas and coal for power in the medium term.
That in turn means its "energy mix will remain more carbon-intensive than planned, heightening risks around both energy security and decarbonisation commitments", Sadiq said.
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