Japan’s emergency energy moves threaten its decarbonisation goals

Japan’s energy sector is undergoing systemic changes that will determine how it powers its economy for decades to come.

In June, the Ministry of Economy, Trade and Industry (METI) stated that the country needs to rebuild between two and ​five aging nuclear reactors by the 2040s and as many ‌as 11 to 14 by the 2050s to secure a stable power supply. Japan shut down all of its nuclear power facilities in the aftermath of the Fukushima nuclear meltdown in 2012 and has only recently restarted a select number of reactors.

Though Japan had already been increasing nuclear power as part of its overall energy mix, the war between the U.S. and Iran reinforced Tokyo’s determination to diversify away from geopolitically sensitive imported fossil fuels.

Just days after hostilities began in February, the Japanese Shipowners’ Association (JSA) instructed Japanese vessels to halt transits or entirely exit the Persian Gulf. By early July, the total number of Japan-linked vessels inside the Gulf dropped from 45 to just four. METI also authorised draws from Japan’s Strategic Petroleum Reserve (SPR) to insulate domestic refiners from the immediate halt in spot arrivals. Before the crisis, Japan depended on the Persian Gulf for roughly 95% of its crude supply.

Notably, the impact on Japan’s LNG supply was more muted. Unlike its near-total reliance on Persian Gulf producers for 95% of its oil, Tokyo has spent decades structurally diversifying its LNG portfolio away from the Middle Eastern exports. Japan gets most of its LNG from Australia (around 38%) and Malaysia (16%). Other top suppliers include the U.S. (10%) and Russia (9%), according to S&P Global. The Middle East provides a smaller portion (about 11%), mostly coming from Oman, Qatar, and the UAE.

U.S. supply, for its part, is increasing with more possible deals on the horizon. Last October, President Donald Trump and Japanese Prime Minister Sanae Takaichi signed a comprehensive trade and investment deal to implement previous commitments. This includes Japan’s $550 million pledged investment in U.S. energy infrastructure, notably LNG.

However, even with limited exposure to the blockage of LNG through the Strait of Hormuz, METI took aggressive action. To protect Japan’s 4 million metric tons of domestic LNG inventories, it enacted emergency regulatory shifts.

It temporarily lifted capacity market penalties on older, inefficient and polluting coal-fired power plants (those with design efficiencies below 42%). That matters. By allowing these legacy coal plants to run past their usual 50% capacity factor limit, the power sector is targeting an immediate conservation of roughly 500,000 tons of LNG, thereby offsetting more than 10% of Japan’s total annual import exposure to the Strait.

Problematically, these emergency measures could jeopardise Japan’s ability to reach its decarbonisation goals, adding weight to arguments by transition analysts who warn that Tokyo’s current policy mix risks putting its mid-century net-zero goals out of reach.

Grid overload

These emergency measures have drawn sharp criticism. The Institute for Energy Economics and Financial Analysis (IEEFA) claims that by activating inflexible nuclear and coal plants to save LNG, Japan is creating an artificial bottleneck on the grid. Because these baseload plants can’t scale down quickly when solar output peaks at midday, the grid is dumping cheap domestic clean energy instead of utilising it.

This structural bottleneck was evident on March 29th when the Tokyo metropolitan area curtailed 3.29 gigawatts (GW) of local solar generation while simultaneously importing nearly 5 GW from the Tohoku region to maintain inflexible thermal and nuclear minimums. While critics call this an artificial barrier to clean power, METI and regional operators, including Tokyo Electric Power Company (TEPCO), counter that keeping these baseload assets online at minimum capacity is operationally non-negotiable for system stability and frequency control, as reported by Asian Power in May.

Before these emergency measures, METI had already been executing a structural pivot to permanently suppress long-term LNG import demand. Under its updated 7th Basic Energy Plan and GX 2040 Vision – which includes an emission reduction target of 60% by 2035 and 73% by 2040 – METI had aggressively reversed its post-Fukushima stance.

The government is targeting a fixed 20% nuclear baseline and elevating renewables to a dominant 40% to 50% share of the national power mix by 2040 to offset rising data centre loads. This dual policy squeeze is designed to choke off baseline fossil fuel generation, mandating a drop in total thermal power to just 30–40% and lowering Japan’s standard LNG import ceiling to an estimated 54–60 million tons per annum.

Declining trend

Energy Aspects analyst Ying-Chin told Gas Outlook that Japan’s LNG demand will follow a declining trend through the remainder of this decade and is primarily driven by the nuclear restart strategy.

“We forecast available nuclear capacity to increase by 46% by 2030 compared with 2025. Nuclear availability is somewhat constrained by current regulations requiring operators to complete Specialised Safety Facility (SSF) works within five years of operation. We assume, for example, that the 0.8 GW Onagawa 2 reactor will be offline for approximately 20 months from December 2026 for SSF upgrades.”

However, there’s a caveat. She added that Japan’s goal to phase out coal generation through reduced coal plant utilisation presents a countervailing factor. “Despite renewable energy ambitions, Japan continues to invest in new gas-fired capacity, which should support gas consumption in the power sector,” she added.

This domestic pivot is underscored by Japan’s official grid forecasts, which project LNG- fired capacity to scale to 85.75 GW by 2034. This expansion is driven by the government actively auctioning off gigawatts of new gas capacity to support surging data centre demand and maintain baseload power stability.