Japanese Member Committee

MOST URGENT ISSUES 

Japan's energy landscape has undergone significant changes in 2026, with peace and stability risks becoming a top priority. The need for secure supply chains has increased, reflecting a global environment characterised by regional conflict, trade tensions, and competition for critical resources. For Japan, which is heavily dependent on imported fuels and materials, these risks are immediate and consequential, creating uncertainty and direct impacts on procurement strategies, investment decisions, and diplomatic relations. This vulnerability is underscored by the fact that Japan relies on imports for approximately 99% of its crude oil (with over 90% sourced from Middle Eastern countries) and around 98% of its LNG. As a result, its energy self-sufficiency rate remains relatively low, at approximately 13%, compared to other major economies. 

At the same time, these dynamics are closely linked to economic security and industrial competitiveness. Stable access to energy and critical materials is essential not only for energy supply but also for sustaining Japan’s industrial base. After the 1970s oil crisis, Japan advanced solar technology through initiatives such as the Sunshine Project, achieving around 50% of global market share by 2000. However, since the mid-2000s, competition from countries such as China has reduced Japan’s share to below 1%. This highlights how supply chain disruptions or rising costs could weaken key industries, underscoring the need for policies that align energy security with industrial strategy. 

Demand-side pressures are also escalating. The rapid development of AI technology, leading to the large-scale expansion of data centres and semiconductor manufacturing, is driving a structural increase in electricity consumption. In Japan, electricity demand from new data centres and semiconductor facilities is projected to increase by approximately 7.62 GW by FY2035. At the same time, grid-scale battery storage capacity is expected to reach approximately 30 GW in operation by 2030. Given these developments, it is imperative to prioritise expanding supply and balancing demand, optimising power grids, and enhancing storage and flexibility to ensure the effective functioning of the system. 

The impact on Japan's power grid appears to be relatively mild compared to the global average. This is likely attributable to operational practices such as project planning that explicitly accounts for grid constraints, coordinated grid connection management, and demand-proximate renewable energy development. These approaches have helped to mitigate congestion and maintain system stability. 

Conversely, infrastructure planning and delivery speed are proving to be among the most challenging aspects. While the need for low carbon generation, as well as grid expansion and flexibility, is widely recognised, execution remains constrained by regulatory complexity, permitting timelines, and investment uncertainty. In response, the Japanese government is advancing legal reforms to enable public financial institutions to provide financing for investments in nuclear power plants and transmission and distribution networks. 

This challenge is further intensified by the growing importance of climate adaptation and resilience, particularly for Japan, which is highly prone to natural disasters. Consequently, energy infrastructure must be reinforced to withstand extreme weather events and climate-related disruptions. 

TRILEMMA TRADE-OFFS 

Japan's approach to the Energy Trilemma has been influenced by its significant reliance on imported fossil fuels. Since the 1970s oil crisis, Japan has proactively worked to diversify its energy sources and enhance efficiency, adhering to the principle of achieving a balance between energy security, affordability, and environmental sustainability. These principles remain highly relevant today as geopolitical instability, particularly in the Middle East, raises concerns about potential supply disruptions reminiscent of past crises. 

In the current context, ensuring uninterrupted energy supply remains the top priority, as any disruption would have severe consequences for both economic activity and daily life. This reality is reshaping trade-offs across the Trilemma. While Japan continues to expand renewable energy and restart nuclear power to enhance sustainability and reduce import dependence, short-term energy security considerations may necessitate continued reliance on thermal power, including coal, to maintain system stability. 

In the medium term, Japan's energy system may undergo significant structural transformation as it adapts to evolving geopolitical and domestic pressures. The priorities within the Energy Trilemma are subject to ongoing review and adjustment in response to changing conditions. In order to be effective, leadership must involve the ability to continuously recalibrate these priorities and translate them into coordinated policy actions. This includes carefully balancing the three elements of the trilemma, prioritising investments that deliver co-benefits – such as grid modernisation that strengthens both security and sustainability – and providing clear policy signals and stable regulatory frameworks to reduce uncertainty and mobilise private capital. 

BOTTLENECK / BLIND SPOT 

The survey identifies workforce and skills shortages as the most significant blind spot. A shortage of skilled workers in the engineering, construction, and digital sectors could delay infrastructure development, including power grids, renewable energy, and advanced energy systems. 

Furthermore, challenges remain in ensuring a reliable and continuous clean energy supply (i.e. the gap in 24/7 clean energy provision). Delivering low-carbon electricity on a continuous basis is difficult due to the weather-dependent and variable nature of renewable energy across regions and time. This highlights a gap between policy ambitions and operational realities. 

BRIGHT SPOT 

A notable bright spot is Japan’s Green Transformation (GX) strategy, adopted at a Cabinet meeting in February 2025, which aims to mobilise ¥150 trillion in public and private investment over the next decade. This initiative seeks to simultaneously ensure a stable energy supply, promote economic growth, and advance decarbonisation. 

Furthermore, the restarting of nuclear power plants, carried out in accordance with stringent safety standards, has the potential to alleviate pressure on emissions and import dependence. 

FROM INSIGHT TO CONNECTION 

In the current geopolitical climate, Japan faces the challenge of improving its energy self-sufficiency by diversifying its energy supply. It is also essential to manage demand growth driven by digitalisation while advancing decarbonisation and maintaining affordability. Addressing these challenges requires concrete discussions on investment prioritisation (e.g. power grids, low-carbon generation, and efficiency improvements), government support, risk-sharing mechanisms between the public and private sectors, and alignment of corporate decarbonisation strategies with national security and economic objectives. Furthermore, while economic conditions and energy resource endowments vary across countries, strengthened international cooperation and dialogue will be essential to ensure a stable and resilient global energy supply.

Acknowledgements

Japan Member Committee