OREANDA-NEWS. Japan is on course to maintain its energy policies through 2018 — including support for nuclear reactor restarts and the use of coal — as the lack of a strong political opposition and economic growth bolster the government of premier Shinzo Abe.

Japan's trade and industry ministry (Meti) in August launched an expert committee to discuss the country's energy policy. The guidelines, which were last drafted in 2014, are due for review every three years. Under the basic policy, Japan plans to generate 20-22pc of power output from nuclear reactors and 26pc from direct coal burning in 2030, and wants Japanese companies' stakes in oil and gas fields to cover more than 40pc of demand in the same year.

Few major revisions are expected. "I do not think there is any need to change the policy framework this time," Meti minister Hiroshige Seko said as the discussions got underway. The talks should focus on measures to achieve the 2030 targets, he said, rejecting calls for an overhaul of the policy and a shift away from nuclear and coal, in line with international trends.

Premier Abe's coalition government has been in power in December 2012, since it when it has scrapped the previous Democratic party administration's policy to phase out nuclear power and lifted an effective ban on coal-fired generation. The moves are designed to provide cheap electricity and curry favour with Japan's business community, which Abe is relying on to revive the economy from two decades of recession, and achieve his major goal of ending deflation.

The "Abenomics" policies of big government spending, massive monetary easing and structural reform have produced mixed results. Tokyo remains upbeat on the economy, which has posted its second-longest expansion since World War 2. The Nikkei share index has stayed strong after hitting a 26-year high in November, with major corporations posting record half-year profits. But wage growth is still stagnant, and underlying inflation has remained around zero since 2016.

Abe has asked the business community for another 3pc wage increase in 2018, as well as to make a ?300bn ($2.7bn) contribution to childcare as part of a planned new ?2 trillion stimulus package. But the government is facing a backlash from businesses, which are lobbying harder for a swift restart of nuclear reactors and an expansion of the nuclear fleet.

A series of corporate scandals has dented the reputation of Japanese manufacturers and dealt a blow to Tokyo's nuclear revival policy, just as the drawn-out reactor restart process had started to gain momentum. Data falsification by the country's third-biggest steelmaker, Kobe Steel, has forced utilities Kansai Electric Power and Kyushu Electric Power to delay the planned January-March restart of four nuclear reactors as they carry out safety inspections of the tainted steel firm's products used at their plants.

The two utilities had been forcing through plans to restart the reactors, despite continuing court battles seeking to block their return. But Tokyo's nuclear policy received a blow on 13 December, when the Hiroshima high court ordered fellow utility Shikoku Electric Power to suspend plans to restart its Ikata No. 3 reactor. Shikoku Electric has challenged the court injunction against the reactor, which has been shut since October for regular maintenance. But the ruling, the first such judgement by a high court, could have a significant influence on future court decisions.

Tokyo's coal-friendly policies are also facing a backlash at home, as falling profitability forces some firms to scrap or delay their coal-fired power development projects. Japan's environment ministry, which is frustrated by the power industry's slow progress implementing measures to cut CO2 emissions, has toughened its stance against new coal-fired power projects and is calling for developers to reconsider their plans. The city of Sendai on 1 December put into effect the first ordinance limiting coal-fired power projects, after the development of such plants triggered a public debate.

While uncertainty remains over the direction of future nuclear and coal policy, Japan has made significant progress in its campaign to end restrictions in LNG contracts as part of its strategy to become an international LNG hub by the early 2020s. The Japanese fair trade commission's milestone judgement in June calling for an end to LNG resale restrictions has already prompted Malaysia's state-owned Petronas to agree to provide flexibility to its Japanese LNG customers in future contracts.

Japanese firms are accelerating efforts to tap growing LNG demand in Asia-Pacific, pursuing trading opportunities to help manage their excess LNG availability as domestic demand weakens because of gradual nuclear reactor restarts and the imminent arrival of new US supplies. Japan has also stepped up its investments in Asian LNG infrastructure projects, in line with Meti's pledge to provide $10bn of financial support. Japan imported 75.7mn t of LNG in January-November, down by 0.1pc on a year earlier.

Upstream, Japan's equity oil and gas output growth has stagnated. Output edged up by just 0.2pc on the year to 1.467mn b/d of oil equivalent in the April 2016 to March 2017 financial year. Japanese companies' equity stakes in overseas fields produced enough to meet 27.4pc of demand, a record high — although this was up by just 0.2 percentage points on a year earlier, and sustained by a fall in crude imports. Cuts to Japanese refining capacity have sent crude demand lower, with imports hitting 3.2mn b/d in January-October, down by 3pc from a year earlier.

Abe's government has strengthened its diplomatic efforts to win a renewal of the UAE's offshore 700,000 b/d Adma-Opco concession, which expires in March 2018. Japanese upstream firm Inpex, which is 18.94pc owned by the government, holds 12pc of Adma-Opco through its wholly-owned subsidiary Jodco. The UAE has long been the second biggest crude supplier to Japan behind Saudi Arabia, with Abu Dhabi's state-owned Adnoc alone accounting for 25pc of Japan's 2016 crude imports.

But Japan is about to suffer a setback closer to home, as two key Indonesian oil and gas concessions expire at the end of 2017. Indonesia's state-owned Pertamina is taking over the Mahakam block in January after Total and Inpex, which each own 50pc stakes, failed to reach a new production-sharing (PSC) deal. And Inpex and Chevron have decided not to extend Indonesia's East Kalimantan PSC, which includes the Attaka block. Oil and gas output from Mahakam and Attaka hit 68,000 b/d and 1.4bn ft2/d (14.4bn m2/yr) in the financial year to 31 March.

The absence of any serious opposition to Abe and his Liberal Democratic Party (LDP) may also help keep Japan's energy policies mostly intact. Tokyo governor Yuriko Koike, a former LDP lawmaker who was also previously defense and environmental minister, formed a new conservative, reformist party ahead of elections in October and initially drew strong public support for an agenda that included a phase-out of nuclear power. But a failure to merge with Democratic Party resulted in a divided opposition and helped secure a major victory for Abe in the polls, leaving the government in control of policy for the foreseeable future at least.