First Bank to Enter Japan's Electricity Futures Market, Supporting Stable Electricity Supply and Expanding the Market
MUFG Bank Global Markets Sales and Trading Division
Profile
Tomoyuki Abe
Expert
Global Client Solution Office
Global Markets Sales and Trading Division
MUFG Bank
Joined MUFG Bank in 2010. After working as a corporate relationship manager (RM), moved to the market division. In the Market Sales Department, worked in western Japan (Osaka) and Singapore, where he was responsible for derivative sales in the large enterprise sector. While exploring new business opportunities, he developed an interest in the electricity market and saw an opportunity for the bank. Operations began in 2024.
Hirotaka Kato
Vice President
Global Client Solution Office
Global Markets Sales and Trading Division
MUFG Bank
Joined MUFG Bank in 2019. After working as a corporate relationship manager (RM), was seconded to Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., where he worked as a yen interest rate trader. He joined the Global Markets Sales and Trading Division in 2024 and joined this electricity project starting in April 2025. He is responsible for promoting the electricity futures clearing business, product development, and sales.
Creating an environment for safe and reliable transactions
Following the full liberalization of electricity retail in 2016, Japan’s electricity market opened to competition, leading to the entry of many retail electricity providers. At the same time, price volatility increased as market-based pricing mechanisms took hold. Because electricity cannot be stored and supply must continually match demand, prices can fluctuate sharply - at times surging severalfold.
As a result, a number of retail electricity providers were unable to absorb sudden spikes in prices and were forced to suspend or exit the business. In many global markets, both corporate and individual end users commonly hedge future electricity prices to manage this volatility. In contrast, Japan’s electricity market remains relatively young, and market participants have long lacked an environment in which they could transact with confidence.
Recognizing this gap, Mr. Abe felt that MUFG Bank could provide some value. "I thought that by entering the market as an intermediary, entities with strong social credibility like us could enable everyone to trade with greater peace of mind." In financial markets and overseas electricity markets, major financial institutions, including banks, already act as intermediaries, helping ensure transaction safety. However, there was no such precedent in Japan. To explore this possibility, the team began by conducting extensive discussions with the exchange and other stakeholders in Japan's electricity market.
Meeting the expectations of market stakeholders
Power generators, retail electricity providers, exchanges, and many others involved in the electricity market welcomed the bank's entry. According to Mr. Abe, the reason is the unique role that only a bank can fulfill. “Unlike traditional bilateral transactions, exchange-based trading allows retail electricity providers, for example, to mitigate losses even if a counterparty exits the market,” he says. “By leveraging the bank’s credibility and supporting exchange transactions as a clearing intermediary, market participants can reduce credit risk and transact with confidence.”
From the exchange’s perspective, the entry of a major bank was also expected to strengthen the stability of the overall trading system and support increased market activity.
With this clear market need in mind, Mr. Abe reassessed MUFG Bank’s approach to entering the electricity market. Rather than starting with trading or derivatives, he concluded that prioritizing the clearing business was essential. At the time, electricity futures trading accounted for only about 0.1% of Japan’s total electricity usage and increasing market liquidity was viewed as a prerequisite for broader market development.
Building shared understanding inside the bank
Starting a new business involves significant challenges. However, the strong desire of MUFG Bank to contribute to the stabilization and expansion of the electricity market as a pioneer, along with the support of colleagues, kept the initiative going. "Since it was a completely new endeavor, our colleagues, including those in the back office, showed interest and provided enthusiastic support. We are still in the process of expanding recognition and penetration, but we aim to gradually establish a solid framework," says Mr. Abe.
In September 2024, MUFG Bank became the first bank to obtain both trading participant and clearing participant qualifications from the Tokyo Commodity Exchange (TOCOM), which handles energy commodity futures. In April 2025, Mr. Kato joined the project to further accelerate the initiative. Today, the team is actively working with power companies to deepen understanding of electricity futures trading and explore new financial products based on customer needs.
Delivering value beyond expectations
"We are grateful for your presence. We are glad that the bank has entered the market." Feedback like this continues to be heard across the industry. Since MUFG Bank's entry, TOCOM's trading volume has increased dramatically, and the number of participants in exchange-hosted events has grown to approximately seven times the 2022 levels. International interest has also increased, with MUFG Bank receiving inquiries from international players and drawing broader attention to Japan’s electricity market.
Reflecting on the project’s progress, Mr. Kato points to the firm’s core strengths. “The trust and credibility we’ve built over many years, our financial strength, and our experience in financial markets have enabled us to earn the confidence of stakeholders across the electricity ecosystem, including exchanges,” he says. “In addition, our Relationship Managers understand the importance of this initiative and actively support it. By leveraging their established client relationships, we can engage customers effectively and provide tailored solutions.”
Looking ahead, Mr. Abe says, "We aim to contribute to the stabilization of electricity prices and the market while delivering the benefits of market-based transactions to all electricity users. We will strive to create a framework where everyone can freely and confidently choose how they procure electricity." Mr. Kato adds, "We plan to expand beyond clearing and broaden the scope of value provision. We also want to share the knowledge gained from our electricity market initiatives with our colleagues and customers."
MUFG Bank's challenge in the electricity market has only just begun.