Japan Market Insights September Ⅲ 2025: Japan’s Geothermal Paradox and Energy Market Winners

Japan’s Untapped Energy Goldmine

Japan is known worldwide for earthquakes, volcanoes, and hot springs. Together, these make the country the third-largest holder of geothermal resources globally—after the U.S. and Indonesia. And yet, less than 1% of Japan’s electricity is generated from geothermal.

Why? The hot spring industry. Lobby groups argue that geothermal drilling could cause springs to dry up. Their resistance is so strong that policymakers simply avoid the fight.

Energy vs. Hot Springs: An Obvious Choice Ignored

Rationally, the choice should be simple: energy security matters more than preserving every hot spring. But the lobbying power of the onsen industry means Japan keeps its geothermal locked underground.

Instead, Japan cuts down forests for solar panels, experiments with offshore wind (only to see Mitsubishi Corp. recently exit), and spends billions importing oil and LNG every year.

INPEX Abroad, Because Japan Says “No”

The irony is that INPEX, Japan’s largest energy company, is now developing geothermal projects in Indonesia—because it cannot do so at home. In other words, Japan exports its know-how and investment capital while refusing to benefit domestically.

No Effort to Adapt

Even worse, the hot spring industry does not try to innovate or coexist. No research programs, no new drilling technologies, no compromise proposals. Their entire strategy is: block everything.

What Investors Should Note

For investors, this is more than a cultural curiosity. It highlights how policy and vested interests shape markets:

• Domestic energy equities (like INPEX or Mitsubishi Corp.) are forced to seek growth abroad, as local projects remain blocked.
• Foreign geothermal developers may capture more upside, as Japan creates demand abroad while keeping its own potential untapped.
• Macro risk remains: Japan’s dependence on imported oil and LNG keeps the yen vulnerable to global energy shocks.

The Real Winners: Traders and Tankers

Here lies the real irony. Japan’s refusal to use geothermal guarantees a permanent role for fossil fuel supply chains.

Trading houses like Itochu and Mitsubishi Corp., and shipping giants such as MOL or NYK Line, are indispensable in keeping oil and LNG flowing into Japan.

So while geothermal power stays buried under Japan’s volcanic soil, the ones sailing tankers across oceans—or trading the very fuels Japan cannot live without—remain the true winners.