Soaring electricity prices and surging import expenditures: Japan’s energy dilemma and reflections amid the U.S.-Israel-Iran war

Although the immediate direct impacts have thus far been avoided, Japan must better prepare for future uncertainties. Japan needs to continue diversifying its liquefied natural gas (LNG) supply sources. Currently, long-term supply contracts typically insulate Japan from spikes in spot-market LNG prices; therefore, such contracts should be maintained at a reasonably high level. However, given numerous future uncertainties, Japanese firms may find it increasingly difficult to sign new long-term contracts—a challenge that has already been acknowledged, yet effective and cost-efficient policies remain to be formulated. LNG must be transported by ship, and insurance is a prerequisite for shipment. Yet current insurance relies heavily on reinsurance provided by London-based insurers. Reinsurance coverage could be disrupted due to varying security conditions and host-country policies. To ensure uninterrupted LNG transportation, there is active advocacy for introducing a domestic reinsurance mechanism—whereby Japan’s public sector would step in to provide reinsurance support when necessary. Due to boil-off losses and high storage costs, LNG stockpiles are typically maintained at only a few weeks’ worth of supply. In contrast to oil’s relatively high reserve levels, this low LNG reserve level is drawing growing concern. Although the issue has been recognized, no effective, economically viable solutions currently exist to significantly raise LNG storage capacity. 8. Asia’s vulnerability has been laid bare—urgent regional cooperation is needed As I previously noted in my opening remarks, Asia has been the region hardest hit by this crisis. Highly dependent on Middle Eastern energy and holding extremely low energy reserves, Asia’s inherent vulnerability has been exposed—not only in Asia, but also in Japan. Asia is Japan’s largest market and the core of its supply chains. Thus, safeguarding Asia’s energy security aligns directly with Japan’s national interests. This is precisely why Prime Minister Sanae Kishida proposed the ‘Partnership for Resilient Energy Supply in Asia’ (POWER Asia), pledging 1.5 trillion yen (approximately USD 10 billion) to support various initiatives across Asia aimed at enhancing energy security. Initial priorities will include assisting with the procurement of expensive energy resources and building strategic reserve systems. In the future, assistance may expand to include measures such as energy efficiency improvements, further strengthening Asia’s energy resilience. The initiative was announced at the Asia Zero Emission Community (AZEC) Summit. In addition to Japan, other key ASEAN members comprising the AZEC, along with Australia, India, South Korea, Bangladesh, Sri Lanka, and Timor-Leste, also participated in the summit. I hope the ‘Partnership for Resilient Energy Supply in Asia’ evolves into a region-wide framework built upon the foundation of the Asia Zero Emission Community, thereby further bolstering Asia’s energy security. The precise trajectory of the current crisis remains unclear—but rather than waiting passively for outcomes, we must act now to reinforce our own energy security. Since the outbreak of the war among the United States, Israel, and Iran on February 28, 2026, we have continuously monitored its impact on global energy markets and affected countries, publishing multiple articles on the subject. As our neighbor—and given its high dependence on international energy markets—Japan’s energy situation and energy policy have remained a focal point of our attention, prompting us to publish numerous articles specifically addressing Japan’s energy challenges.

Japanese Prime Minister holds talks with Malaysian Prime Minister, reaching consensus on energy and security cooperation

Given the current Middle East situation, both sides confirmed their commitment to strengthening cooperation in securing petroleum-related products from Malaysia and agreed to enhance the supply chain resilience of critical minerals—including rare earth elements. They also discussed measures to ensure stable supplies of liquefied natural gas (LNG) and fertilizer feedstocks. Malaysia is rich in natural resources. Approximately 15% of Japan’s LNG imports come from Malaysia—ranking second among all LNG supplier countries, just behind Australia. The two leaders also confirmed plans to strengthen maritime security cooperation, including joint training exercises between the Japan Maritime Self-Defense Force and the Royal Malaysian Navy. Both sides welcomed the signing of a Memorandum of Understanding (MoU) between their respective maritime safety agencies to further promote collaboration in maritime security. Prime Minister Kishida stated: “Amid rising international uncertainty regarding energy-related developments, Malaysia’s importance as a stable LNG supplier to Japan is further increasing.” She also expressed gratitude to Malaysia—as a trusted partner of Japan—for its longstanding stable supply of LNG, medical gloves, petroleum-related products, and fertilizer feedstocks, and requested continued stable deliveries. In response, Prime Minister Anwar highlighted the newly signed LNG procurement contract between Japan’s JERA and Malaysia’s national oil company PETRONAS, affirming Malaysia’s strongest possible commitment to ensuring stable supply. Both sides also agreed to advance energy and critical-materials supply-chain resilience under the ‘Power Asia’ framework. In the field of critical minerals, they pledged to deepen bilateral cooperation further—working jointly with like-minded countries and international development financial institutions. Additionally, Prime Minister Kishida emphasized the need to leverage the ‘Asia Zero Emission Community (AZEC)’ framework to accelerate concrete decarbonization cooperation projects. She noted that 2027 marks the 70th anniversary of diplomatic relations between Japan and Malaysia, adding: “I hope we can further deepen the long-standing ties we have nurtured together, achieving mutual exchange and shared development.”

Japanese Industry Minister aims to advance Asia's energy resilience at AZEC summit

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Japanese Industry Minister Ryosei Akazawa will attend the AZEC summit to boost Asian energy resilience amidst Middle East tensions. ASEAN plans an oil stockpiling scheme by 2027, while Japan allocates billions to subsidize electricity and gas bills.

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2026-10-11

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Japanese Industry Minister aims to advance Asia's energy resilience at AZEC summit

Japanese Industry Minister aims to advance Asia's energy resilience at AZEC summit

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