TT Connects with Bob Takai, CEO of EEX Japan
Japan’s power market is undergoing a profound transformation. With the liberalization of the electricity market beginning in 2000 and a national push toward decarbonization, the demand for sophisticated risk management tools is greater than ever. The Japanese power futures market is at the forefront of this evolution, providing a critical platform for hedging against price volatility.
The European Energy Exchange (EEX) has emerged as a key player in this space, with its Japan Power Futures contracts seeing notable growth since their launch in May 2020. Trading volumes have surged, and EEX has captured a significant market share. Ahead of this week’s Japan Power Summit, we spoke with Bob Takai, CEO of EEX Japan, to discuss the factors driving this growth and what lies ahead for the market.
Could you share a bit about your professional background and what led you to your current role as CEO of EEX Japan?
Since 1980, I spent four decades at Sumitomo Corporation, deeply involved in both the physical and derivatives trading of commodities across the energy and financial sectors. I also participated in the deregulation and development of futures markets for precious metals and oil. These experiences naturally led me to the electricity market, and when EEX approached me during Japan’s power market liberalization, I saw a unique opportunity to contribute to the launch of a derivatives market tailored to Japan’s evolving energy landscape.
What are the most prominent trends you’re observing, and what growth do you anticipate for the market in the coming years?
The Japanese power futures market has experienced unprecedented price volatility, largely driven by geopolitical risks such as the war in Ukraine and the resulting fluctuations in natural gas and LNG prices. At the same time, global efforts toward decarbonization are accelerating energy transformation. In this context, the role of the power market is becoming increasingly important, and the need for robust price risk hedging tools is growing rapidly.
What is EEX Japan’s primary strategic focus, and what new initiatives are you currently working on?
Compared to Europe’s 25-year history in power derivatives, Japan’s market is still in its infancy, with only five years of development and trading volumes representing just 1–2% of Europe’s total. Yet Japan consumes about one-third of Europe’s electricity, indicating significant growth potential. Many Japanese power companies have yet to adopt derivatives for risk management, so we are focusing on explaining the benefit of hedging and outreach to encourage broader participation.
What are the biggest challenges EEX Japan faces when expanding its range of power products in the Japanese market?
Japanese companies and regulators tend to be more conservative in their approach to derivatives compared to their Western counterparts. This is especially true in the power industry. Overcoming this psychological barrier and fostering a more open mindset toward derivatives usage is one of our biggest challenges.
How is EEX Japan collaborating with firms like Trading Technologies to enhance the digitization of power trading?
If Japan’s power derivatives market follows the same trajectory as Europe and the U.S., it’s inevitable that trading will shift from analog methods like phone calls to digital platforms. This transition will also pave the way for algorithmic and system-based trading. Companies like Trading Technologies play a crucial role in this transformation, and we believe their contribution will be increasingly vital as the market evolves.
Looking back at the past few years, what accomplishment at EEX Japan are you most proud of, and what were your key takeaways?
Liquidity is the key to a successful derivatives market. To achieve this, it’s essential to attract a diverse range of participants, both domestic and international. EEX Japan Power has successfully brought together over 100 power trading companies, with a balanced mix of Japanese firms focused on hedging and overseas firms engaged in risk-taking. Maintaining this balance while further enhancing liquidity is our ongoing goal as we continue to build a user-friendly and resilient market. We are encouraged that we are on the right path by the significant growth at volumes, e.g., annual traded volume grew from 6.7 TWh in 2022 to over 100 TWh in the first nine months of this year only.
To learn more about TT’s solutions for trading both Japanese and global power markets, complete our online inquiry form.