New mandatory procurement rules have the potential to reshape Japanese power trading opportunities and market dynamics in the next few years.

METI is proposing a fundamental shift in how electricity retailers secure supply. The proposal centers on a new requirement that would mandate retailers to secure 50% of their projected demand three years in advance, rising to 70% one year ahead of delivery.

For international power traders and potential market entrants, this regulatory development represents both unprecedented opportunity and complexity that demands expert navigation.

The reform takes aim at two flaws that have dogged Japan’s electricity market since its full liberalization in 2016. The first is an overcrowded retail sector dominated by small, asset-light newcomers who depend on the spot market to cover daily demand — and get burned when prices swing. The second is that such short-term buying offers power producers little visibility on future demand, dulling their incentive to invest in new generation or lock in fuel supplies.

The new market mechanism is meant to fix that imbalance by steering the industry away from “just-in-time” trading toward a steadier, contract-based model.