Japan LNG futures: Watch this space

In recent years the Japanese government – rattled by a soaring bill for LNG imports in the wake of the 2011 Fukushima nuclear accident – has been advocating the development of what would be the world’s first LNG futures market. 

The powerful Ministry of Economy, Trade and Industry issued a report in April 2013 which concluded Japan should establish a futures market during the 2014-15 fiscal year. The report followed five rounds of meetings with suppliers, end-users and financial institutions. It envisaged the development of the market in two stages: a cash-settled market to start with, and then an LNG market for physical deliveries. Creating the market this way would make prices more transparent and encourage more visible Asian gas benchmarks to develop, as well as allowing Japanese companies to hedge their LNG purchases.