Japan, long the high priest of LNG diversification, is preparing to abandon its own gospel. After half a century of spreading risk across nearly every producer with liquefaction capacity, Tokyo is shifting towards something more concentrated: a supply portfolio increasingly anchored in the US and indexed to one benchmark, Henry Hub.
For decades, Japan was the world’s dominant LNG importer and the sector’s great pluralist. Its strategy, forged after the oil shocks of the 1970s, was simple: never rely too heavily on any one exporter. Japan built a mesh of bilateral deals stretching from Brunei and Indonesia to Qatar, Australia and Nigeria. Last year, cargoes from 20 countries called at its terminals. Diversity was not just prudent—it was the operating logic of Japanese energy security.
This breadth gave Tokyo leverage. When it sought relief from inflexible destination clauses, especially from Middle Eastern producers, it let long-term contracts quietly expire and shifted investment elsewhere. Even in moments of severe disruption—such as Covid lockdowns, Panama Canal congestion or sanctions on Russia—Japan’s LNG supply chain held up remarkably well. China, now overtaking Japan as the world’s largest LNG buyer, has consciously adopted similar tactics.
But Japan’s portfolio is narrowing. Over the past 12 months, its utilities have signed at least 8.5mt/yr of new long-term contracts with US sellers. JERA, the country’s biggest buyer, has taken 5.5mt/yr of that volume and aims to lift its US offtake to 10mt/yr by the early 2030s.
More US volumes are likely. Under the Trump administration’s explicitly transactional approach, Japan has been encouraged to commit capital and offtake to American projects, including the long-delayed Alaska LNG development. Japanese companies have already issued letters of intent for roughly 2mt/yr from Alaska; once the project reaches FID, Japan’s involvement will likely deepen.
Assuming Japan’s imports remain near today’s levels, the US could become its largest LNG supplier within five or six years. The US’ share would jump from 5% at the turn of the decade to more than a quarter by 2030.
Japan has stumbled into concentration before. After the Fukushima disaster in 2011, nuclear output collapsed and LNG demand surged. Australia stepped in. By 2023, nearly 40% of Japan’s LNG came from Australian projects—a dependence tolerated partly because shipping time is short (under two weeks), Canberra is an ally and Japan operates one of the larger liquefaction facilities.
But Australia’s policy climate is shifting. In 2022, the government agreed with exporters to divert east-coast gas to the domestic market to address shortages. Debates over price caps, reservation rules and potential export restrictions persist. Costs for new LNG projects have risen, driven by mandatory carbon-capture requirements. And politically, Canberra is signalling a gradual move away from dependence on fossil-fuel export revenue to pastures green. For buyers with 20–25-year horizons, these uncertainties matter.
American exposure
Japan had hoped to replace fading Australian flexibility with production from Canada’s West Coast, Mozambique’s Rovuma Basin, Russia’s Arctic areas or expanded trains in Papua New Guinea. Not all of these have advanced as planned. The US, with prolific shale supply, is keen to promote itself as the only scalable alternative.
Yet US LNG brings a different kind of exposure. Most US long-term sales contracts are indexed to Henry Hub, the benchmark for US domestic natural gas. That price reflects US weather patterns, storage levels, pipeline bottlenecks and production from shale basins such as the Permian and Haynesville. As Japan shifts more of its supply to US-linked contracts, its LNG costs increasingly depend on American fundamentals rather than oil-indexed pricing tied to Brent.
The mechanics are specific. Henry Hub prices rise when cold winters draw down storage, when Gulf Coast pipelines face outages or when shale drilling slows. They fall when associated gas from crude production floods the system or when mild winters keep storage bloated. For Japanese buyers, this means the spread between Henry Hub and global LNG spot prices—already volatile—becomes a central budgeting variable.
Another emerging factor is the US’ datacentre boom. AI-driven computing loads are pushing utilities to secure more dispatchable capacity. Until storage or nuclear options scale, that means more gas-fired generation. US power-sector gas demand is projected to climb steadily this decade. Even Idemitsu, a Japanese refiner, has recently invested in a US datacentre developer, Overwatch Capital, and plans to supply natural gas to its facilities. As electricity demand rises, Henry Hub could tighten even when global LNG markets are well supplied. Japan would feel that shift.
Then there is geography. LNG from the Gulf Coast travels twice as far to Japan as Australian cargoes, increasing exposure to Panama Canal delays, hurricanes in the Gulf and even Indian Ocean chokepoints. Japan, with minimal strategic gas storage, has little buffer if shipments slip.
Seen optimistically, the pivot to US volumes could be Japan’s ‘Plan Z’—the last stage of its LNG era before a hoped-for transition to renewables, hydrogen and possibly fusion. A pragmatic hedge to secure supply while the next energy system is built.
The less generous interpretation is that Japan is reversing its own hard-won principles. A country that built its security on supplier plurality is drifting towards overreliance on one producer whose domestic politics, infrastructure and technological ambitions will increasingly influence Japanese energy costs. The long-run consequences will reach far beyond commodity pricing.
Yuriy Humber is chief editor at Japan NRG. This article is taken from our Outlook 2026 report. To read Outlook 2026 in full, click here.
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