Publication date: Nov 3, 2025
Strategic Procurement in Japan: Managing Risk Beyond the Basics
Japan’s electricity market stability was tested during the 2021–2022 global energy crisis, when LNG import prices surged 300% year-over-year and exposed the vulnerability of relying solely on traditional retail contracts. For industrial consumers, effective risk management has evolved from a back-office function to a strategic necessity.
The country’s dependence on imported LNG (37% of generation) and coal (31% of generation) creates direct exposure to global commodity shocks that flow through to retail bills via Fuel Cost Adjustment mechanisms. At the same time, JEPX wholesale market volatility—where the exchange handled 267.7 TWh in FY2023—adds another layer of price risk. For a typical 30 GWh industrial consumer, FCA costs peaked at 35% of total energy expenses in early 2023.
However, sophisticated risk management tools are emerging. Futures markets have grown significantly (EEX volumes increased from 18.3 TWh in 2023 to 72.9 TWh in 2024), while innovative contract structures including FIP-enhanced agreements, split supply frameworks, and fixed-price virtual PPAs are providing corporate buyers with new pathways to manage volatility. Companies implementing comprehensive hedging strategies can reduce cost volatility by 40–60% while maintaining competitive pricing.
Together with our partners at E&C Consultants, we examine these risk management strategies and their practical application in our joint article: “Strategic Procurement in Japan: Managing Risk Beyond the Basics”.