Japan has begun a full-fledged effort to revive domestic LNG shipbuilding to bolster its economic and energy security, on expectations that demand for the fuel will remain firm through the transition to net-zero by 2050.
Japan has not built an LNG carrier domestically since 2019, because intensifying competition such as from South Korea and China eroded the industry's competitiveness. But maintaining the capability to build such vessels is increasingly seen as strategically important, given concerns that resource-poor Japan could struggle to secure shipping capacity to transport fuels in the event of a crisis.
The ministry of land, infrastructure, transport and tourism (Mlit) on 21 August convened shipbuilders, shipping companies, other government agencies and the country's largest LNG importer Jera for talks on reviving domestic LNG carrier construction. Participants agreed to work together toward that goal, with the shipbuilding industry expressing its commitment to establishing self-sustaining construction capability.
The talks came after the government incorporated domestic LNG carrier construction into its growth strategy for 17 strategic sectors, which was approved by the Cabinet on 21 July. The plan calls for Japan to build three to five LNG vessels a year from 2035 onward, while strategically leveraging shipbuilding know-how and capabilities held by like-minded countries, such as South Korea, which has extensive experience in building membrane-type LNG carriers, the dominant vessel type in the global market.
To advance the initiative, Mlit confirmed that it will work with industry stakeholders to clarify the number of vessels to be ordered, construction schedules, required capital investments and costs, while fleshing out support measures and institutional frameworks, including financial assistance. It remains unclear how much budgetary support the government will provide, with industry participants calling for the project to be treated as a national initiative and for measures to address the substantial cost gap with rival shipbuilding nations.
Balancing role
Japan is stepping up efforts to strengthen LNG security across its supply chain, given the country's gas demand almost entirely depends on imports. LNG is expected to continue playing a vital role in maintaining a stable power supply while the share of weather-dependent renewable energy rises and the role of nuclear power remains uncertain due to safety concerns. Electricity demand is also projected to increase, driven by the growing use of artificial intelligence.
That said, LNG is expected to increasingly serve as a balancing power source, making it unclear whether Japan's domestic LNG demand will continue to grow. The outlook will largely depend on progress in restarting existing nuclear reactors, developing next-generation reactors and expanding renewable power capacity. This underscores the need for greater flexibility in LNG procurement, including access to an adequate fleet of LNG carriers, because importers may need to divert or sell excess cargoes overseas in response to shifts in domestic demand.
Japanese firms currently handle 100mn t/yr of LNG, well above domestic demand of 65mn t/yr. Some of this is used to generate profits through LNG trading abroad, but these volumes could be redirected to the domestic market if needed, providing a form of supply security distinct from strategic stockpiling, an official at the trade and industry ministry Meti said previously.
