Japan's liquefied natural gas imports fell 7% last month as utilities prioritized cheaper coal over gas-fired generation. The shift underscores how persistent LNG price premiums are reshaping fuel procurement strategies in the world's second-largest LNG buyer.
Gas-fired power plants generated 17.3 terawatt-hours in June, according to Bloomberg, a 16% decline from the same month in 2025. Coal-fired generation rose 4.6% over the same period, based on data from Japan's nine largest power utilities. The substitution reflects a cost-driven pivot: Asian spot LNG prices remain elevated despite reports of improving energy flows through the Strait of Hormuz.
Japan's nine major power companies collectively operate about 50 GW of coal capacity, much of it built after the 2011 Fukushima disaster as a stopgap. These plants now run at higher utilization rates, eroding Japan's long-standing reputation as a premium LNG market. The country's LNG import infrastructure, including regasification terminals with total capacity exceeding 200 million tonnes per year, is now operating well below its potential.
The Middle East conflict continues to influence Japan's fuel calculus. While alternative supply routes via the Strait of Malacca and expanded U.S. LNG exports offer some buffer, the war risk premium embedded in LNG prices makes coal the economically rational choice for Japanese utilities in the near term.
Counter_argument: Critics argue Japan's increased coal burn risks locking the country into higher long-term emissions, potentially undermining its 2030 decarbonization targets. Coal imports also expose Japan to volatile global thermal coal markets, and the LNG infrastructure built in recent years may face underutilization costs if the coal preference persists beyond the current price cycle.