Japan
A liberalised day-ahead exchange, a capacity market since 2020, and the country that gives the JKM benchmark half its name.
Overview
Japan has almost no hydrocarbons of its own. It is also one of the most open power markets in Asia and one of the biggest LNG buyers on earth. Put those together and the price of electricity here is mostly a question about the cost of somebody else's fuel.
Liberalisation came in stages. Full retail competition from 2016, legal unbundling of transmission from 2020. Wholesale power trades on the Japan Electric Power Exchange (JEPX), and a capacity market introduced in 2020 pays separately for being available. Gas arrives almost entirely as LNG, priced off a mix of the JKM spot marker and older crude-linked term contracts.
Nuclear has been coming back, slowly, for a decade now. Every reactor that restarts pushes imported LNG out of the stack, so a licensing decision taken in Tokyo lands on the fuel bill of every other importer in the region.
Japan is big enough that what it chooses to burn moves the regional gas price. A safety regulator's decision in Tokyo changes the cost of power in Manila and Mumbai.
Market structure
The wholesale market is real enough. The power system underneath it is physically two systems, tied together by a handful of converter stations.
Who does what
| Function | Body | Role |
|---|---|---|
| Power exchange | JEPX | Day-ahead spot and intraday trading |
| Cross-regional coordination | OCCTO | System planning and the capacity market |
| Transmission | Regional TSOs | Legally unbundled from generation since 2020 |
| Policy and market design | METI | Ministry of Economy, Trade and Industry |
| Nuclear licensing | NRA | Independent safety regulator; approves restarts |
The 50 / 60 Hz split
Hokkaido, Tohoku and Tokyo run at 50 Hz. Chubu, Hokuriku, Kansai, Chugoku, Shikoku and Kyushu run at 60 Hz. Blame the 1890s: Tokyo bought German generating equipment, Osaka bought American, and nobody ever got round to fixing it.
You cannot simply wire two AC systems together at different frequencies. Power crosses through frequency converter stations, back-to-back HVDC links, and their combined capacity is small next to either system's peak demand. Electrically this is two countries with a thin cable between them.
When the converters are full, east and west price independently. JEPX publishes area prices alongside the national system price. If you hold a position, the area price is the one that pays you.
Infrastructure — power and gas
Ten service areas, a dense and elderly grid, and one of the largest LNG receiving networks anywhere.
Power
Ten service areas
Each grew up around a regional utility. Transmission is now unbundled. Interconnection between areas is thin and binds often.
Frequency converters
The only road between the 50 Hz and 60 Hz systems. Their capacity is the hard limit on east–west transfer.
Nuclear fleet
Around 15 reactors operating, roughly 33 GW, out of 32 operable units. Restarts continue under NRA review.
Gas and LNG
Domestic gas production is negligible. Supply lands as LNG at a long list of receiving terminals, most of them built and owned by the regional power and city-gas utilities they feed. They were built to serve their owners, not a market, so third-party access has always been grudging. A domestic gas trading hub has been slow to appear for exactly that reason.
Schematic — system topology, not a geographic map. Ten service areas, grouped by frequency. Converter capacity between east and west is small relative to either system's peak demand, which is why the two halves can price independently.
Demand and supply
Demand goes nowhere, the generation mix keeps moving, and the LNG import requirement falls a little further with every reactor that comes back.
Demand
Japanese electricity demand is flat. The trajectory looks like Europe's, not India's or the Philippines'. A shrinking population and better efficiency cancel out whatever electrification adds, so the question worth asking is which fuel produces the power, not how much of it the country needs.
Supply
Gas-fired CCGT has carried the load since 2011, with coal underneath and a growing renewable fleet alongside. Nuclear is coming back. Gas-fired generation has fallen every year since 2017 as reactors returned and solar built out.
| Indicator | Direction | Comment |
|---|---|---|
| Electricity demand | Flat to declining | Efficiency and demographics offset electrification |
| Nuclear output | Rising | Restarts continuing; policy targets a materially larger share by 2040 |
| Gas-fired generation | Declining | Down every year since 2017 |
| LNG imports | Declining | Roughly 11 Bcf/d in 2018 to around 9 Bcf/d in 2025 |
| Renewables | Rising | Solar led; grid and curtailment constraints increasingly binding |
Shares for 2025. Source: Low Carbon Power, corroborated by Ember.
FY2022 from METI/ANRE, Japan Energy 2024; 2024 and 2025 from Ember. Different reporting bases — read as direction, not a continuous series.
Kashiwazaki-Kariwa Unit 6 came back into commercial operation in March 2026, after more than fourteen years offline. One reactor that size takes out something like 1.3 million tonnes of LNG a year. Run that across a restart programme and Asian LNG demand has changed shape, not just level.
Price setting mechanism
Cheapest first, and the last unit you need sets the price for everyone who cleared. Standard marginal-cost auction.
How the auction works
Generators offer into JEPX for each half-hour period. The exchange stacks the offers from cheapest to dearest and walks up the stack until supply meets demand. Whichever offer closes the gap is the marginal unit, and its price is paid to everyone who cleared, cheap plant included.
In Japan that marginal unit is usually a gas-fired CCGT. Delivered gas cost divided by plant efficiency is the electricity price for most hours of the year, which is why the power desk and the LNG desk are having one conversation rather than two.
What a generator actually earns
Energy revenue is only part of the income. Since 2020 the capacity market run through OCCTO has paid separately for availability. A plant can look marginal on energy economics and still be perfectly viable once that payment lands. Running hours come in consistently above what a spark-spread calculation on its own would predict.
The unit trap
JEPX quotes yen per kilowatt-hour. Most of the region quotes per megawatt-hour. Compare the two unconverted and you are out by a factor of 1,000, and it looks plausible in either direction.
JEPX publishes spot price history as downloadable CSV, not as citable figures on a page. Drawing an unsourced line would be worse than leaving this empty, so it stays empty until the series is pulled from jepx.info or japanesepower.org.
Balancing, from April 2026
Balancing procurement moved from weekly, in three-hour blocks, to day-ahead in 30-minute units. That is 48 slots a day. A generator that misses the spot market can now rebid straight into balancing, which ties the two together much more tightly than before. Price caps on the main balancing products were cut hard at the same time.
Regulatory regime
Policy sits with METI. Nuclear safety sits with an independent regulator, system coordination with OCCTO, and there is no supra-national body sitting above any of them.
| Body | Remit |
|---|---|
| METI | Energy policy, market design, the strategic energy plan |
| Nuclear Regulation Authority (NRA) | Independent nuclear safety regulation and restart approvals |
| OCCTO | Cross-regional system coordination and administration of the capacity market |
| Electricity and Gas Market Surveillance Commission | Market conduct and network access oversight |
The reform arc
Retail competition opened fully in 2016. Transmission was legally unbundled in 2020, the same year the capacity market started. Then April 2026: balancing procurement was restructured and JEPX's spot platform went API-only. That second change reads as technical and isn't. Manual bidding is finished, and desks without the plumbing are out of the auction.
Nuclear restarts are not a formality
The NRA decides, and its decisions are genuinely uncertain rather than procedural. Tsuruga Unit 2 was found not to meet regulatory standards in November 2024. Treat restarts as probabilities. A schedule they are not.
Key links
Primary sources for this market. Figures on this page are drawn from these and from published market data.