Energy Risk Management in Japan
The Japanese energy market is a high cost market dependent on foreign imports for oil, gas and coal. The lack of natural resources in this highly industrialized and modern economy has brought with it a very high cost base for the energy complex. Consequently, Japanese consumers and industry are highly energy efficient already having gone through Oil shocks in 1973 and 1979; however, this situation has come at the cost of the highest energy prices in the world. High prices are an attraction to market deregulation but Japan has always been a highly protected, paternalistic market with government playing a very direct role in energy and industrial policy. Consequently, Japanese energy trading and risk management markets are very immature. Trading companies called the Shosha are actually not traditional trading companies that take on much risk but are really commodity suppliers for Japanese consumers, that is, they source raw materials for Japanese industry. Energy risk management in Japan is overshadowed by security of supply issues and an underdeveloped financial derivatives market as compared to North America or Europe. This is changing but it is the slow pace of gradual change endemic to Japanese culture not to disrupt ongoing business practices and not to upset consumers. Harmony is still the watch word in this very rich but predominantly conservative nation. Thus, energy risk management is an evolving profession and its application in Japan is nascent.
KeywordsExclusive Economic Zone Electric Power Company Japanese Consumer Electric Utility Industry Tokyo Electric
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