Cold wave and rising fuel costs drive electricity prices in northeastern Japan and Tokyo to a four-year high

According to Golden Ten Data APP, due to abnormally cold weather in the Northeast and Tokyo regions and rising fuel prices, Japan’s spot electricity prices soared to multi-year highs over the weekend. Data from the Japan Electric Power Exchange shows that on Sunday, day-ahead electricity prices in the Northeast and Tokyo rose by 17% and 11% respectively compared to a week earlier, reaching 40.18 yen (0.25 USD) per kilowatt hour. This is the highest price since September 2022 and the first time the 40 yen per kilowatt hour mark has been breached since then. On the same day, the national average spot price for electricity in Japan rose by 14% to 34.44 yen per kilowatt hour.

Meteorological data from the European Centre for Medium-Range Weather Forecasts shows that this week, the average temperature in Japan’s Northeast region is expected to be 4.3 degrees Celsius (7.7 degrees Fahrenheit) below normal, while the Tokyo region’s average temperature is expected to be about 3 degrees Celsius below normal. The drop in temperature will drive up demand for electricity for heating.

Liquefied natural gas (LNG) is the main fuel for power generation in Japan, and current LNG prices remain at high levels since 2022. The volume of LNG exported from major supplier Qatar via the Strait of Hormuz is only a fraction of pre-conflict levels.

According to reports, Bank of Japan Governor Kazuo Ueda recently stated that the Bank of Japan expects core inflation to remain near its 2% target, but also recognizes that there are some upside risks for inflation. As the price increases in energy-related products gradually transmit to consumer prices, inflationary pressure may become further evident in the coming months. He also said the Bank of Japan is closely monitoring the policy actions of other major central banks and has not ruled out the possibility of deploying unconventional monetary policy tools again in the future.