The Ministry of Economy, Trade and Industry plans to create a comprehensive futures market for energy products at the Tokyo Commodity Exchange in 2014, sources said.
The market will list energy products such as liquefied natural gas, coal, fuel oil and liquefied petroleum gas on the TOCOM, which currently trades gasoline and other petroleum products futures as well as Middle Eastern crude oil futures.
The ministry is also considering listing electricity futures on the exchange if transmission operations are separated from power utilities, the sources said.
Formation of fair prices of commodities like crude oil and LNG in the futures market will help Japanese power utilities purchase energy sources for thermal power generation at lower costs, thus making it easier for them to cover electricity shortages caused by the suspension of nuclear reactors.
Japan’s LNG consumption jumped 11.6 percent year on year in 2011 to make up for the nuclear shortfall. The world’s largest LNG importer now has to buy the gas at prices higher than they are supposed to be due to their link to crude oil prices. The yen’s recent drop against the dollar has also pushed up the power suppliers’ costs to procure LNG.
The envisaged energy futures market will provide Japanese resources importers with an opportunity to hedge cash price fluctuation risks, the sources said.