Energy shocks are once again rippling across global markets and Asia sits on the front line.

The escalating conflict in the Middle East has already triggered the largest surge in global natural gas prices since the Russia-Ukraine conflict in 2022. For Asia’s import-dependent economies, the risks are immediate: Roughly 87% of crude oil and 86% of liquefied natural gas transiting the Strait of Hormuz is bound for Asian markets.

The disruption is already visible in shipping routes and prices. Major Japanese LNG shipping operators including Nippon Yusen, Mitsui O.S.K. Lines and Kawasaki Kisen Kaisha have instructed vessels to avoid or wait near the Persian Gulf as security risks rise. As Asian buyers scramble for replacement cargoes on the spot market, the cost of transporting LNG from the Atlantic basin to Asia has surged to around $264,000 per day, roughly six times higher than in late February.

Prime Minister Sanae Takaichi confirmed that the country holds about 254 days of strategic oil reserves, a cushion designed to withstand supply disruptions. Electricity supply, however, is far more exposed.

Between 30% to 40% of Japan’s power generation relies on LNG, yet the country maintains only two to three weeks of LNG feedstock for electricity generation. In an increasingly volatile geopolitical environment, this dependence turns fuel supply into a question of national security rather than simply one of energy economics.

Japan’s reliance on Middle Eastern stability runs deeper than direct imports. The country has not purchased crude oil from Iran since 2019 after U.S. sanctions were imposed, yet much of the oil and LNG shipped to Japan still passes through the Strait of Hormuz.

Japan's LNG imports from the Middle East — specifically Qatar, Oman and the UAE — make up 11% of its total. In an interconnected gas market where many long-term LNG contracts are indexed to crude benchmarks, instability in the Middle East translates into higher costs for Asian consumers, even when physical supply remains intact.

This comes at a moment when, after more than a decade of forecasts predicting declining energy consumption, the country’s latest Strategic Energy Plan now anticipates electricity demand rising by around 5.8% by 2034 compared with 2024 levels.

Higher LNG prices are already creating knock-on effects across regional energy markets. As gas becomes more expensive, utilities in Japan are exploring whether some power generation can switch back to higher-grade thermal coal, a shift that has already pushed up seaborne coal prices. On the other hand, Japan retired nearly 1,200 megawatts of coal-fired capacity over the past three years without adding new units, limiting the extent to which coal can offset rising gas prices.

The energy turmoil also comes at a politically sensitive moment for Japan. Takaichi is facing a major economic test as surging global energy prices threaten to feed into higher electricity bills and inflation at home. Japan imports almost all of its energy, meaning that volatile fuel prices combined with a weak yen could quickly raise costs for households and industry. For a government that campaigned on easing the burden of rising living costs, the sudden resurgence of energy price shocks underscores how tightly Japan’s economic stability remains tied to global fuel markets.

The United States has been increasing LNG exports to Japan, accounting for roughly 8.7% of imports in 2024. The latest disruption could push Japan to rely more heavily on U.S. LNG imports.

At the same time, the crisis may reinforce Tokyo’s continued participation in Russia’s Sakhalin-2 LNG project, which still supplies around 9% of Japan’s LNG. Japanese policymakers have repeatedly argued that maintaining stakes in Sakhalin remains essential for energy security because of its geographic proximity and lower transport costs. The question now is whether Japan’s next phase of energy security will focus on reshaping LNG supply chains or on reducing dependence on them.

In this context, attention inevitably returns to nuclear power, a source Japan largely abandoned after Fukushima but which now sits at the center of the country’s energy security debate.

Takaichi already signaled support for expanding the role of nuclear energy, while Yuichiro Tamaki, leader of the Democratic Party for the People, recently argued that Japan should operate all available nuclear reactors to offset the economic impact of the Iran conflict and rising electricity prices. Such calls suggest that rising energy security concerns may create rare areas of cross-party alignment in Tokyo, even as local opposition and regulatory scrutiny continue to complicate reactor restarts.

The timing is also symbolically charged. This month marks the 15th anniversary of the Fukushima No. 1 nuclear power plant disaster, an event that reshaped Japan’s energy policy and public attitudes toward nuclear power for more than a decade. Japan’s latest Strategic Energy Plan envisions nuclear energy providing around 20% of electricity generation by 2040. Recent polling also indicates that a majority of Japanese respondents now support restarting reactors that meet post-Fukushima safety standards, reflecting growing concern over energy security and electricity prices.

In practice, however, expanding nuclear generation remains far from straightforward. Of the 33 reactors technically operable in Japan today, only 15 have restarted. Even those that eventually resumed operations illustrate how slow the process can be.

Niigata Prefecture’s Kashiwazaki-Kariwa plant, the world’s largest nuclear-power station, faced years of regulatory scrutiny and local political resistance despite repeated efforts to restart its reactors. Another nine reactors across Japan have applied for restart approval but face uncertain timelines as safety reviews and local negotiations continue. The gap between policy ambition and operational reality limits how quickly nuclear energy can reduce Japan’s reliance on imported LNG.

Expanding renewable power remains central to Japan’s long-term strategy for reducing energy vulnerability. Meeting the country’s clean power ambitions could require around ¥38 trillion in investment by 2035 to expand renewable generation and strengthen electricity infrastructure.

Scaling domestic clean energy would reduce exposure to volatile fuel imports while supporting the electrification of data centers, semiconductor manufacturing and other strategic industries expected to drive Japan’s next phase of economic growth. Achieving this will require faster permitting, grid expansion and clearer policy alignment that treats clean energy infrastructure as a strategic national asset rather than merely an environmental objective.

Taken together, the latest geopolitical shock exposes a deeper tension in Japan’s energy strategy. Electricity demand is rising again, LNG markets remain volatile, nuclear restarts are progressing slowly and renewable expansion requires vast investment and policy coordination.

Japan therefore finds itself again at an energy crossroads. Continuing to rely on global LNG markets leaves the country vulnerable to geopolitical shocks, yet reducing that dependence will require accelerating nuclear restarts, renewable deployment and grid investment simultaneously.

Energy security for Japan will increasingly be defined not by how successfully it navigates the global fuel market, but also by how quickly it can redesign its power system to depend less on it.

© The Japan Times