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Market Chatter: Heatwaves, Weak Yen Push Japan Power Prices to Multi-Year Highs

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Searing heat, a weak yen and rising fuel costs have driven spot electricity prices in Japan to their highest in three and a half years, Bloomberg reported on Wednesday.

The day-ahead spot price rose to 24.78 yen ($0.15) per kilowatt-hour on Wednesday, rising 24% this week alone and taking it to its highest since January 2023, the news outlet reported, citing Japan Electric Power Exchange.

Temperatures were set to hit 40 Celsius in parts of Japan on the same day, while Tokyo highs were forecast at almost 37 Celsius, the article said, citing weather forecaster Vaisala.

As well as stronger demand to meet air conditioning needs, rising fuel costs have further compounded the rise in power prices.

The benchmark Japan-Korea Marker for spot liquified natural gas settled at $21.61 per million British thermal units on Tuesday, the highest since late March, traders told Bloomberg.

A weak yen has worsened matters, with the currency slipping to 163 yen per dollar for the first time since 1986, further raising the cost of importing gas and coal to generate power.

The government may intervene by subsidizing household energy bills from July until September, the article said, based on an announcement by Prime Minister Sanae Takaichi in May.

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)

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