Power futures are becoming an increasingly popular tool for Japanese companies to manage risk arising from fuel-price volatility, with the number of short-term contracts traded on the nation¡¯s biggest platform rising for four straight months.

The combined number of day, weekend and week contracts traded on the European Energy Exchange (EEX) almost tripled from a year earlier to more than 10,000 lots in July, a second consecutive monthly record. EEX hosts the vast majority of power futures trading in Japan, with a 97% market share in 2025.

¡°One possible reason behind the increase in short-term products trading is that, with fuel markets remaining difficult to predict due to the Iran crisis, it appears that more market participants are continuing to shift part of their trading focus toward futures products such as daily contracts, which are relatively independent of fuel price movements,¡± said Leo Takai, research and administration manager at EEX.

The pickup is particularly evident in day contracts, which also hit successive all-time highs in June and July, he said.

The trend reflects a growing need for Japanese power generators and retailers to hedge against risk associated with sharp price swings. With thermal power still the dominant source of the country¡¯s electricity, spot prices are highly sensitive to any fluctuation in the cost of fuels such as liquefied natural gas (LNG).

The benchmark LNG price for Northeast Asia and a key pricing reference for Japan, known as the Japan Korea Marker, has been volatile since the outbreak of the Iran war in late February. The near-closure of the Strait of Hormuz has choked supply via a route that previously handled a fifth of global LNG shipments. Iran and Oman have yet to reach an accord to reopen the waterway, after optimism earlier in the week that an agreement was within reach.

According to EEX, futures volumes traded on the platform in July were equivalent to nearly 44% of spot volumes on the Japan Electric Power Exchange in terms of terawatt-hours. That marked an increase of 4 percentage points from June and the second consecutive month that the proportion of futures volumes had increased.

In addition to domestic companies, participants in the Japanese power futures market include international commodity and power traders as well as financial institutions. The recent uptick in trading activity may also reflect opportunistic attempts to capitalize on short-term volatility, said Misao Endo, senior research scientist at the Tokyo-based Central Research Institute of Electric Power Industry.

¡°Unlike utilities with physical power demand exposure, these market participants trade power prices, or spreads ¡ª such as the difference between electricity and fuel prices,¡± Endo said. ¡°Trading opportunities to generate profits may have increased.¡±