Japan Aims to Enhance Regional LNG Competition as Domestic Demand Slows Down

Japan’s LNG imports are projected to decline 2.5% annually through 2034 due to a shift towards renewables and nuclear power, while aiming to enhance its energy market influence in Southeast Asia.

Key View

• Japan is expected to see a long-term decline in LNG imports, decreasing by an average of 2.5% annually over our forecast period, due to its strategic shift towards renewables and nuclear power in line with its decarbonization goals.
• Japan is bolstering its influence across the Southeast Asian energy market with strategic investments in LNG-power projects and facilitating Memorandums of Understanding (MoUs) for the resale of surplus LNG. This will enhance the market’s influence over Asia’s significant projected LNG demand growth.
• Moderately higher energy prices in 2025 may hamper Japan’s ambitions to stimulate demand in Southeast Asia, as high prices could weigh on regional consumption.

We maintain a bearish long-term outlook on LNG imports into Japan, driven by decarbonisation efforts in the power sector aimed at increasing the share of renewables and nuclear power. We anticipate that Japan’s LNG imports will decrease at an average annual rate of 2.5% from 2024 to 2034, with total consumption expected to fall to 73.0bcm by 2034. Currently, Japan is the world’s second-largest LNG importer, following Mainland China, primarily due to its lack of pipeline gas capacity and limited domestic gas consumption. This reliance on LNG is crucial for maintaining energy security. However, Japan’s energy policy is undergoing a significant transformation, focusing on decarbonisation and reducing fossil fuel dependence to achieve emissions reductions. This trend aligns with Japan’s Strategic Energy Plan, which aims to reduce gas dependency by 20.0% by 2030. The plan emphasises increasing the share of renewable energy and reconsidering nuclear power as essential components of its low-carbon initiatives. The government is actively pursuing these goals by setting ambitious targets to transition its energy mix, with nuclear power expected to contribute 20.0% of electricity needs by 2040.

As Japan faces a shift in its energy landscape, the government is looking to boost regional competition in the liquefied natural gas (LNG) market. With domestic demand slowing due to a combination of economic factors and an increasing shift towards renewable energy sources, Japan recognizes the need to adapt its approach to securing LNG supplies. This strategy aims to enhance cooperation with neighboring countries and diversify import sources, ensuring energy security despite a challenging domestic market.

The Japanese government has been actively engaging with other LNG-exporting nations, promoting collaborative projects and seeking investment opportunities. By fostering regional partnerships, Japan is not only aiming to increase competition among suppliers but also to drive down prices for consumers. This alignment with neighboring countries such as Australia and the United States is critical for Japan to maintain its energy stability while managing the ongoing transition toward greener alternatives.

Moreover, by boosting regional LNG competition, Japan can mitigate risks associated with overdependence on a limited number of suppliers. As it seeks to enhance its energy portfolio, the country is also exploring innovations in technology and infrastructure to optimize the LNG value chain. These efforts underline Japan’s commitment to a balanced energy strategy, blending traditional fossil fuels with renewable energy sources while safeguarding its economic interests in a post-pandemic world.

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