Tokyo plans to create the world's first futures market in Japan for liquefied natural gas, a fuel for thermal power generation, as early as fiscal 2014, the Economy, Trade and Industry Ministry announced Tuesday.
Japan currently imports LNG at relatively high prices. This has been one reason why utilities are raising or considering raising electricity charges.
The government hopes to lower the price of LNG imports by enabling negotiations with LNG-producing nations based on prices set on the envisaged futures market.
Japan's imports of LNG have surged as it relies more on thermal power plants after shutting down most of its nuclear plants after the Fukushima nuclear crisis began.
Starting Wednesday, METI plans to consult with 18 companies, including Tokyo Electric Power Co., Tokyo Gas Co., other electricity and gas utilities, and trading companies, so it can draw up the details of the market by the end of this fiscal year.
Futures trading, which makes contracts for commodities at set prices for delivery on a future date, functions to mitigate risks of future price fluctuations.
METI officials said a futures market would set prices that reflect the supply and demand balance. It is believed LNG would be traded at lower prices than at present. The futures market may eventually include China and South Korea, both LNG importing nations, the officials said.
Japan's LNG consumption mostly relies on imports through negotiated transactions for long-term contracts with producing nations. As procurement prices are linked to crude oil prices, LNG has been imported at higher prices compared to the United States and Europe due to surging oil prices in recent years.
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