Japanese power futures liquidity thinned faster than the physical market grew
EEX’s 40% ratio versus JEPX spot volume in June masks a shallower hedging capacity for a shock-prone market.
Brent crude front-month traded at $89.67 a barrel Tuesday (2026-07-21), up 1.24%, as the Iran ceasefire that normalized Strait of Hormuz traffic remains fragile.4 EEX’s trading volume in Japanese power futures equaled about 40% of JEPX spot-market volume in June, down from 174% in March. That ratio collapse looks like the physical market simply grew faster — but the denominator and numerator tell different stories.
JEPX spot volume hit 27.8 TWh in May, with spot transactions accounting for 46% of Japan’s 60.4 TWh total power demand, up from 45.4% in April.5 The physical spot market is undeniably bigger. But the futures side did not just shrink relative to a larger base; it actively shed volume after the March volatility spike faded. EEX reported “extraordinary” surges in European gas derivatives trading — 62% higher — during the first quarter as the Iran conflict rattled markets.1 Japanese power futures rode that wave. Once the ceasefire and normalizing Hormuz traffic took hold, the speculative overlay unwound.6
What the ratio at 40% obscures is how thin the hedging capacity now sits relative to a market that just experienced severe oil supply disruption. Japan’s crude oil imports plunged 66% during the Iran crisis.3 The Strait of Hormuz, through which nearly 20% of global oil supply once moved, was effectively closed from late February.2 If a second shock hits, the futures market has already shed most of its war-risk liquidity. VIX traded at 17.67 Tuesday (2026-07-21), down 5.25%, but crude implied volatility has averaged 78% since late February — compared with below 30% before the conflict.2 That macro volatility has not translated into sustained Japanese power futures participation.
The physical market’s own growth may compound the problem. JEPX intraday volumes averaged 24.5 GWh per day in May, up 9.8% month-on-month, with total monthly traded volume rising 3.5% to 758.6 GWh and transactions hitting a record 308,557.5 That is still small — 1.3% of total electricity demand — but the trend is up. The market is operating with less futures liquidity per unit of physical trade than it had in March.
What market participants focused on the 174% to 40% decline as a single data point may miss is the timing. OPEC output fell another 177,000 b/d in May, according to the group’s monthly report, while the IEA estimated global production declines at 1.4 million b/d.3,4 ING estimates just 6-7 million barrels per day are now transiting Hormuz.6 That is the floor. If the ceasefire fractures, the futures liquidity that existed in March — nearly double the physical spot — may not return on the first price spike. The hedging infrastructure is shallower now than when the market needed it most.
The data to watch is EEX’s monthly volume release for July and August. If the JEPX ratio stays below 50% while spot volumes continue to grow, large physical players will have less capacity to execute size without moving prices. If it recovers above 100%, the June number may prove a noise-driven outlier. For now, the futures market has left the hedging playbook where it was in March — but that playbook may not work on the next call.