The energy strategic triangle: Security, affordability, and sustainability
Japan’s Basic Energy Plan is the backbone of the country’s energy policy. It is updated every few years, and sets out its current and target energy mix, demand, and supply. Japan’s 7th Basic Energy Plan, issued on February 7, 2025, marked a substantial shift away from its 2021 predecessor. Unlike the earlier strategy, which focused on sustainability and decarbonization, there was a renewed focus on energy security —albeit energy security has always been one of the key pillars.
The shift is due to several factors, including the Russia-Ukraine war (although this had a relatively muted impact on Japan compared to Europe given the tendency of Japanese utilities to secure long-term LNG purchase agreements), and significant cases of undersupply. These include a series of occurrences of severe weather conditions coinciding with power plant maintenance shutdowns which resulted in near-blackout incidents in Tokyo in March 2022.
Without policy intervention, undersupply would become more acute over the medium term as energy demand increases. Despite increased energy efficiency, the population decline driving a decrease in power demand and the Fukushima disaster, overall demand for electricity in Japan is forecast to grow significantly due to rising industrial demand. The Organisation for Cross-regional Coordination of Transmission Operators (OCCTO) forecasts Japan’s power consumption to be 5.8% higher in 2034 (around 850TWh) than in 2024, with semi-conductor factories and data centers increasing energy demand by 7.15GW by 2034. Maximum demand attributable to new and expanded data centers and semiconductor plants is projected to be 13 times this year’s level by 2034.
A Basic Energy Plan focused on security of supply and affordability, and deprioritizing decarbonization, is the result of these shifts.
LNG as Plan B if sustainable solutions do not materialize
Another departure in Japan’s 7th Basic Energy Plan from its predecessor is that it introduces the concept of “Plan B” in case its Paris Agreement Nationally Determined Contributions (NDCs) are not achieved. Plan B is heavily reliant on LNG. In 2010, Japan imported around 70.56 million tonnes of LNG and after the Fukushima disaster, this became around 83.18 million tonnes per annum. In 2022, Japan imported around 66 million tonnes of LNG, which is significantly down as it is. According to the strategy, in a 2040 “Plan A” scenario, LNG import volume is projected to be around 54 million to 60 million tonnes—representing a further gradual reduction in LNG supply. In a 2040 “Plan B” scenario where sustainable energy solutions do not materialize, however, more than 74 million tonnes of LNG would be imported.
In addition, the strategy also recognizes increased risks in the global LNG supply chain, and maintains the target of Japanese companies purchasing for use or trading 100 million tonnes of LNG annually. It also encourages the optimization of procurement strategies (including joint procurement), shared use of tank facilities in Asia and other regions, and enhanced trading capabilities (more on this below).
In effect, in Japan’s current energy strategy there is less emphasis on the must-go-cleaner tone of the previous strategy, and more on alternative scenarios where obstacles to achieving sustainability goals are not overcome.
The USD550 billion Japan-U.S. investment framework
Bilateralism (especially bilateral cooperation with the U.S.) also features centrally in Japan’s strategy.
In July 2025, as part of tariff discussions with the U.S., Japan agreed to invest USD550bn in the U.S. in certain strategic sectors, including energy and critical minerals. The energy sector has been identified as mutually beneficial, and the first transaction could take place this year.
Projects that could potentially be developed under the investment framework include LNG and nuclear power, with LNG projects designed for export to Japan and nuclear power designed for the U.S. involving Japanese technology, equipment and/or services. Cooperation with a U.S. administration with a high energy sector focus would help Japan secure its domestic energy needs over the medium and long term.
Indeed, Japanese energy companies recently announced their intention to “triple” the volume of LNG imports from the U.S. by 2030, as a result of decreases in production at some sites in Asia Pacific. This seems highly ambitious in that at that volume there may be a supply glut, although the direction is clear. Prior to this, in June 2025, JERA had announced its intention to offtake up to 5.5 million tonnes per annum from the U.S., having signed Sale and Purchase Agreements with NextDecade Corporation and Commonwealth LNG, as well as Heads of Agreements with Sempra Infrastructure and Cheniere Marketing LLC for the future supply of LNG from the U.S..
More LNG offtakers in ASEAN
Japan is currently the second-largest LNG importer globally after China.
Several ASEAN countries are expected to become larger LNG buyers as they shift from coal to gas, which is easier and more cost-effective to deploy than other baseload alternatives. Further, this transition is driven in part by the need to improve urban air quality in economies such as Indonesia and Vietnam, as moving from coal or heavy fuel oil to gas substantially reduces local pollutants. In Indonesia’s case, it will also shift from being a gas exporter to being a gas importer.
A larger cohort of ASEAN buyers could leverage the Japan-U.S. LNG deals to support the suite of LNG projects in the U.S. taking FID. The trend points to a changing buyer landscape and opportunities for joint offtake or portfolio arrangements.
Given the scale of capital expenditures required for LNG projects, stronger ASEAN demand broadens the pool of offtakers, though some may be less creditworthy than Japanese LNG buyers. ASEAN utilities and aggregators may, going forward, play a key role in taking capital-intensive greenfield LNG projects to FID, even with Japan remaining one of the largest LNG importers globally.
LNG or renewables?
Japan’s need for large-scale LNG supply over the medium and long term will in large part be determined by whether its renewables roll-out is a success. Wind and nuclear provide good examples.
2024 saw a record increase in Japanese offshore wind capacity, leaving it with 253.4MW of offshore wind capacity in 2025. By way of context, however, this is smaller than one 300MW unit at a gas-fired power plant. Offshore wind is still far from the targets of 10GW by 2030 and 30–45GW by 2040. Macroeconomic conditions have also made it challenging for renewables projects in Japan over the past few years, with factors including rising supply chain inflation and increasing interest rates leading to the cancellation of three offshore wind projects in 2025, resulting in a loss of 1.7GW of projected capacity and of four years of development. Japan’s 7th Basic Energy Plan recognizes the challenge in the offshore wind sector and in the wider energy sector, addressing matters such as supply chain issues (including on associated critical minerals). However, there are areas the Basic Energy Plan does not address—such as issues with the government subsidy design and bidding regimes—which need to be substantially adapted to mitigate the significant supply chain costs and risks facing investors and to achieve as much certainty on costs as possible.
One other open question on renewables is nuclear power. After the Fukushima nuclear accident in 2011, Japan shut down its fleet of nuclear reactors. It is now in the process of restarting existing nuclear power plants and constructing new ones, with announcements indicating that 19 existing plants will be restarted and three new plants will be built. The greenfield construction of a new nuclear power plant takes a minimum of 15 to 20 years, and large-scale public anti-nuclear sentiment still exists after Fukushima. The actions of the Japanese government (including on government subsidies, as discussed above, as well as on public communications and regulatory actions to ensure the safety of nuclear plants) will determine the level of dependence Japan will have on LNG and natural gas for its baseload electricity supply.
Finally, methane abatement is the most effective near-term decarbonization lever for oil and gas, outpacing CCUS, low-carbon hydrogen and electrification, with priorities including operational efficiency, leak detection and repair, pneumatic replacements, continuous monitoring, capturing vented gases, and reduced or zero flaring. The World Bank warns that inefficient or unlit flares can significantly worsen methane emissions. Robust operational management, measurement, reporting and verification are essential to preserve gas’s lifecycle climate advantage. As one of the biggest LNG importers in the world, a consideration for Japan will be how it seeks to manage and implement methane abatement on extraction and production sites, which are not necessarily located in Japan, while securing a stable supply chain.
LNG trading
In the meantime, geopolitical risk impacting LNG supply chains has led to substantial increases in LNG trading opportunities. Major Japanese companies active in the LNG industry have established LNG trading desks in Singapore, which aligns with Singapore’s stated goal of becoming an LNG hub, both in the physical and virtual sense.
The increasing development and liquidity of LNG trading is leading to the growth of the Asian LNG market, further embedding Japanese businesses and Asian businesses more broadly in global LNG supply chains.
What to expect over the short, medium, and long term
In the short term (6–12 months), the first projects under the Japan-U.S. investment framework may be announced. While the framework is not specific to the energy sector, the political focus on energy security means it is likely that at least some of the framework’s funds will be devoted to energy projects (including on LNG) in the U.S., the products of which may be exported to Japan (and potentially other ASEAN countries). We may therefore see Japan sourcing an increased share of its energy (including LNG) from the U.S.. Further, given the elevated levels of LNG trading over 2025, businesses should continue to expect heightened trading and portfolio optimization activity over the short term.
In addition, Reactor No 6 at the Kashiwazaki-Karima nuclear power plant was approved for restart on January 21, although on the next day, operation was suspended again after an alarm sounded during the removal of control rods used to suppress nuclear fission. Kashiwazaki-Karima is the biggest nuclear power plant in the world, having seven units with capacity to produce 8.2GW in total. Operations there are mostly still suspended—the safe restart of the plant could contribute significantly to Japan’s energy supply.
In the medium term (12–18 months), stakeholders should expect to see further incremental progress on the 19 nuclear reactors approved for restart, combined with development work on new-build plants. Kansai Electric, which has restarted seven nuclear reactors since Fukushima, announced in 2025 the start of preliminary surveys for constructing a new nuclear reactor in Mihama, Fukui Prefecture. Detailed surveys to examine the impact of earthquakes are expected to start in April 2027. This should give businesses a clearer idea of the direction of travel in Japan of renewables as a proportion of domestic energy supply compared to LNG.
Over the long term (18 months–5 years), ASEAN nations may emerge as LNG buyers. These economies could supply some of the significant capex needed to bring more LNG projects into operation. Further, businesses should expect AI-related demand to continue to shape the energy sector, driving increases in demand for domestic energy. In Japan, a mandatory emissions trading scheme is scheduled to be established in this timeframe, the details of which are still under development. This may become a driver to move away from the use of fossil fuels, including for AI-related demand. However, to meet the scale of Japan’s energy needs, it is likely that LNG will continue to form part of Japan’s energy mix—by how much will depend on policy choices, industry reaction, and the geopolitical environment.
AloJapan.com