JERA Puts a ¥3 Trillion Price on Keeping Coal in Reserve as Japan Spreads Its LNG Bets
The world's largest LNG buyer is pairing a dual-fuel hedge with fresh Malaysian and US supply, betting flexibility beats efficiency while Middle East risk lingers.
JERA said in its 29 June (2026-06-29) weekly assessment that running both LNG and coal-fired plants under emergency conditions could cut Japan's annual generation costs by roughly ¥3 trillion against relying on gas alone.4
That figure puts a price on optionality just as Japan's fuel security is being tested. Roughly 90% of the country's crude comes from the Middle East, and the war in Iran and the effective closure of the Strait of Hormuz pushed Tokyo to release about 80 million barrels from its strategic reserves, equivalent to some 26 days of domestic demand.1 Gas is the more exposed flank. Around 98% of Japan's gas demand is met by LNG imports, so a supply shock has nowhere domestic to hide.1
That is the logic behind keeping coal on standby rather than retiring it. The dual-fuel case is not a plan to burn more coal in normal conditions; it hedges a gas market where a single disrupted cargo route can move the whole balance.4
The same company is buying its way to a wider supplier base. JERA signed a 20-year contract with Malaysia's Petronas for 2 million tonnes of LNG a year, starting in 2028, a deal reported on 10 June (2026-06-10) and framed around uncertainty in the international energy situation.3 Malaysia is already Japan's second-largest LNG supplier after Australia, at about 15% of total imports, so the agreement deepens an existing relationship rather than opening a new one.3
The bigger shift points west. JERA has set out plans to triple its purchases from the United States to as much as 5.5 million tonnes a year, which would lift US volumes to roughly a third of its total book and mark about a 10% increase on current American imports.3 Spread supply across the Atlantic and the Pacific, and a single chokepoint matters less.
Japan has room to maneuver. The country imported 66.3 Mt of LNG in 2025, down 1.5% year-on-year, holding its place as the world's second-largest buyer after China.1 Consumption has been drifting lower for years on slower growth, more renewables and the gradual restart of nuclear capacity, which lets buyers like JERA restructure contracts rather than scramble for every marginal cargo.1
Still, the diversification push runs against a market that is not cooperating on price. The JKM spot marker for Asian LNG sat at $16.52/MMBtu as of 2026-07-11, and packet signals lean bullish on JKM on supply concerns even as the broader consensus tilts bearish.2 That is the tension in the plan: long-dated contracts lock in volume, but the spot leg of the book stays exposed to exactly the Middle East risk that prompted the hedge.2
For European traders the read-across is indirect but real. ICE Endex TTF front-month traded near €48.80 as of 2026-07-11, and NYMEX Henry Hub front-month sat around $2.94, a spread wide enough that US export economics to Asia remain intact.2 If JERA does triple US offtake, more Gulf Coast liquefaction is spoken for on long-term terms, tightening the pool of flexible cargoes Europe and Asia compete over during a cold snap.3
JERA is not treating this as a fuel-switching story alone. The company said it is investing ¥5 trillion between FY2024 and FY2035 in low-carbon assets, and its Mitsubishi Power arm signed a long-term parts and services deal for the 1.2 GW Ilihan plant in Batangas, in the Philippines.4 The through-line is reach: more suppliers, more geographies, more fuels held in reserve.
The follow-through on the US tripling is the thing to track. The Petronas tonnage is contracted and dated to 2028, but the 5.5-million-tonne American ambition is still a plan, and the packet shows no confirmed offtake against it.3 If those US volumes firm up before the 2028 Malaysian deliveries begin, JERA will have rebuilt its supply map around Hormuz risk faster than the risk itself resolves. If they slip, the ¥3 trillion coal hedge stops being a contingency and starts looking like the base case.4