IEEJ: March 2004

Short-term Energy Supply and Demand Outlook:
Forecast Through Fiscal Year 2004 and Sensitivity Analysis

byYukari Yamashita, Group Manager, Demand Forecast Research Group
Shigeru Suehiro, Researcher, Econometric Analysis Group
Akira Yanagisawa, Researcher, Statistics Information Group
Toshiya Imaeda, Researcher, Econometric Analysis Group
Ryouichi Komiyama, Researcher, Econometric Analysis Group
Energy Data and Modelling Center
The Institute of Energy Economics, Japan

Introduction
This report attempts to forecast Japan’s energy supply and demand during thecurrent economic recovery in fiscal year (FY) 20031 and FY 2004 thereafter. There exist,
however, a number of uncertain factors that could possibly affect the results of such aforecast, both in and outside the country. We will, therefore, postulate the most likely
future economic conditions as the reference case and treat two factors (i.e., crude oil
prices and real GDP) as variable parameters, with additional consideration to thetiming when operation of nuclear power plants, which are currently out of operation,
will be resumed. The results of such a comparative analysis will then be utilized toevaluate the varied impacts of these variable factors on the country’s energy supply anddemand.
The report comprises three chapters: the first chapter reviews the Japanese
economic outlook through FY 2004 that underlies our energy supply and demand
forecast; in the second chapter, the forecast for domestic energy supply and demand
based on growth and production assumptions in the preceding chapter will be analyzed
by primary energy supply, final energy demand (analyses based on energy balancetables), and type of energy consumed (analysis based on supply side data); finally,
chapter three describes the outcome of sensitivity analyses to the two aforementioned
factors and the impact of a situation where the operation of the suspended nuclear
power plants resumes earlier or later than previously expected.

1

Fiscal year (FY ) runs from April to March.
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IEEJ: March 2004

1. Projections of Key Economic Indicators for FY 2003 and 2004
1-1 Framework for Making Short-term Forecast2
In deriving the forecast mentioned herein, two econometric models are utilized: 1)
macroeconomic model and 2) energy supply/demand model (Exhibit 1-1) complemented
by a qualitative analysis of varied energy supply and demand determinants.
Exhibit 1-1: Diagram of Models and Forecast Process
Macroeconomic Model
GDP Components
Wholesale Price Index (WPI), Consumer
Price Index (CPI)

Global Economy, Exchange Rate
Crude Oil Prices

Energy Supply/Demand Model
Industrial Activities/Prices
IIP, Commodity Output

Imports/Exports of Major
Commodities

Primary and Secondary Energy Prices

Energy Demand

Temperature (Cooling/Heating
Degree-Days)

By Economic Sector, By Type of Energy Consumed

Energy Conversion/Power Generation

Nuclear/Hydro Power Supply

Petroleum Products,Electricity, Town Gas

Primary Energy Supply

Energy Imports/Exports
Stock changes

By Primary Energy Source

Key assumptions that are made for the projections are as follows (Exhibit 1-2): thecrude oil prices will move around an average of US$25 per barrel (CIF, imported) in FY
2004, given easier conditions in the international oil market of late; the yen is held
constant

at 110 yen per US dollar3; as for temperatures, which exert measurable

influences on energy supply and demand, the levels of both heating and coolingdegree-days are heald at their averages over the past 10 years4.

This forecast is as of December 16, 2003.
This assumption has been made in reference to Ken Koyama, PhD, “Outlook for World
Oil Market and Crude Prices in 2004,” IEEJ, December 22, 2003.
4 Heating degree-days refer to the aggregate sum of the differences between the daily
average temperature and 14 °C on such days when the former is lower than the latterand cooling degree-days refer to the aggregate sum of the differences between the daily
average temperature and 22 °C on such days when the former is higher than 24°C.
2
3

2

IEEJ: March 2004

Exhibit 1-2: Crude Oil Prices and Foreign Exchange Rates($/bbl)(Yen/$)

35

210
Crude Oil Price (CIF)

Forecast

180

30

150

25

120

20

90

15
10

60
Foreign
Exchange Rate

30

5
0

0
97.1

98.1

99.1

2000.1 2001.1 2002.1 2003.1 2004.1 2005.1(Source: Ministry of Finance, Monthly Trade Bulletin (Nihon Boeki Geppo), forecast by IEEJ)

1-2 Macroeconomic Outlook
We assume that the Japanese economy will have its positive growth trend extended
into FY 2003 from the previous year and achieve an annual real GDP growth rate of
2.3% (Table 1-1). CPI is likely to decline for the fifth consecutive year, reflecting the
non-abating nature of deflationary pressure. Private business investment for the year is
forecast to increase by 11.8%, a large jump after two years of decline. Private final
consumption expenditure, however, is estimated to remain subdued, inching up by 0.6%
in the year, due to the persistent slackness in the labor market and depressed consumer
confidence. Housing investment will likely level off after a bump in demand in the firsthalf of FY 2003 due to the termination of the home mortgage-related tax breaks, which
was then expected to end at the end of the calendar year. As a result of the combinationof the above-mentioned factors and else, domestic private demand is expected to make apositive contribution to real GDP growth of 2.3 percentage points. Public capitalformation (i.e., public investment) is estimated to decline by 11.5% in the fiscal year,
while general government final consumption expenditure is seen to increase by 0.8%.
Public demand, in total, is estimated to make a negative contribution to real GDP
growth of -0.6 percentage points. Exports, led by double-digit growth in exports to China
and the other parts of Asia, will likely grow by 7.8% year-on-year. As external demand
exceeds import that is also expected to increase in line with domestic demand, the net
export will contribute to real GDP growth by 0.6% points.
In FY 2004, the current economic recovery is expected to continue, but so is the3

IEEJ: March 2004

deflationary trend. We expect household final consumption expenditure to show
lackluster performance with an annual growth of 1.0% as the labor market conditions
are unlikely to improve greatly. The growth in private business investment, on the other
hand, is estimated at 6.5%, continuing a strong trend for the second year. Public
investment will remain in tight control, and it is seen declining by 3.2%. Strength inexports to the rest of Asia will likely be sustained and external demand is expected tomake a contribution to real GDP growth of 0.4 percentage points. Combining all the
relevant factors, we expect the Japanese economy to expand for the third straight year
in FY 2004 with a real GDP growth of 1.7% over the preceding year.
Table 1-1: Macroeconomic outlook (reference case)(Units:: 1995 prices in billions of yen)
FY 2002 (Actual)

FY 2003 (Forcast)

FY 2001(Actual)

1st Half

2nd Half

Total

1st Half

2nd Half

Total

FY 2004(Forecast)

530,370(-1.2)

263,902(0.1)

272,707(2.2)

536,609(1.2)

269,481(2.1)

279,644(2.5)

549,125(2.3)

558,406(1.7)

Domestic private demand

398,428(-0.9)

198,458(-1.1)

201,844(2.1)

400,302(0.5)

203,672(2.6)

209,084(3.6)

412,757(3.1)

419,179(1.6)

Private final consumption
expenditures

294,449(1.3)

147,110(1.1)

150,376(0.9)

297,486(1.0)

147,801(0.5)

151,508(0.8)

299,309(0.6)

302,218(1.0)

Private housing investment

18,938(-7.8)

9,501(-1.9)

9,033(-2.3)

18,534(-2.1)

9,422(-0.8)

9,118
(0.9)

18,540(0.0)

18,377(-0.9)

Private plant & equipment
investment

87,023(-3.5)

39,801(-8.9)

44,368(2.3)

84,168(-3.3)

43,742(9.9)

50,324(13.4)

94,066(11.8)

100,169(6.5)

Domestic public demand

121,869(0.2)

58,594(0.9)

63,447(-0.6)

122,042(0.1)

57,245(-2.3)

61,831(-2.5)

119,076(-2.4)

119,581(0.4)

Government final consumption
expenditures

87,752(2.7)

44,376(2.5)

45,195(1.6)

89,571(2.1)

44,631(0.6)

45,664(1.0)

90,295(0.8)

91,739(1.6)

Public fixed capital formation

34,175(-5.2)

14,212(-4.3)

18,249(-5.5)

32,461(-5.0)

12,581(-11.5)

16,156(-11.5)28,738(-11.5)27,830(-3.2)Net exports of goods & services

10,073(-22.2)6,850(40.5)

7,416(42.6)

14,266(41.6)

8,563(25.0)

8,729(17.7)

17,292(21.2)

19,647(13.6)

Exports of goods & services

55,600(-7.2)

30,311(9.2)

31,973(14.9)

62,284(12.0)

32,827(8.3)

34,316(7.3)

67,142(7.8)

71,423(6.4)

Imports of goods & services

45,527(-3.1)

23,461(2.5)

24,557(8.5)

48,018(5.5)

24,263(3.4)

25,587(4.2)

49,850(3.8)

51,776(3.9)

Real gross domestic expenditures(Real GDP)

(Nominal GDP)

500,920

246,018

251,629497,647

246,031252,067

498,098498,238(Nominal GDP)(-2.4)(-1.1)(-0.2)(-0.7)

(0.0)

(0.2)

(0.1)

(0.0)

Industrial production index

90.8(-9.2)

91.9(-0.1)

94.6
(5.7)

93.3
(2.7)

93.3
(1.6)

98.3
(3.8)

95.8
(2.7)

99.2
(3.6)

97.1
(-2.4)

95.8(-2.1)

95.2(-1.1)

95.5(-1.6)

94.9(-0.9)

94.9(-0.4)

94.9(-0.6)

94.3(-0.7)

98.9(-1.0)

98.5(-0.9)

98.1(-0.4)

98.3(-0.6)

98.2(-0.3)

98.1(-0.1)

98.1(-0.2)

98.0(-0.1)

125.1(13.2)

123.1
(0.8)

120.7
(-5.8)

121.9(-2.6)

118.0(-4.2)

110.0(-8.8)

114.0(-6.5)

110.0(-3.5)

23.8(-15.5)

25.7(-3.5)

29.0(37.9)

27.3(14.8)

28.6(11.1)

28.0(-3.4)

28.3
(3.4)

25.3
(-10.7)

18,68819,933
21,99820,965
21,16819,437
20,302(-4.5)(-2.7)(30.3)(12.2)(6.2)(-11.6)(-3.2)(\/KL)
Note: Numbers in parentheses denote year-to-year rates of change in percentage.
Source: Cabinet Office, Preliminary Estimates of National Expenditure (Kokumin Shotoku Tokei Sokuho), forecast by IEEJ

17,539(-13.6)

Nominal gross domestic expenditu(Base year 2000 = 100)
Domestic corporate goods price in(Base year 2000 = 100)
Consumer price index(Base year 2000 = 100)
Foreign exchange rate(\/$)
Crude Oil Price (CIF)($/bbl)Crude Oil Price (CIF)

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IEEJ: March 2004

1-3 Manufacturing Outlook
In FY 2003, Japan’s economy continued to perform well with export-oriented
industries leading the way. Some weaknesses, however, are observed in parts of thebasic materials industry (Table 1-2). Due to the on-going strength in Asian exports andgrowing demand from the domestic auto industry, steel production is expected to remainhigh at around 109.7 million tonnes. Petrochemical industry has also been experiencing
strong demand from domestic and Asian customers with ethylene output reaching 7.3
million tonnes, or a level slightly above that of the previous year.
Table 1-2: Industrial outlook (reference case)
FY 2001(Actual)FY 2002 (Actual)
1st Half
2nd Half
Total
54,63055,161 109,791(4.7)(10.6)(7.6)

FY 2003 (Forecast)
FY 2004
1st Half
2nd Half
Total(Forecast)
55,45854,260 109,718 108,712(1.5)(-1.6)(-0.1)(-0.9)

102,065(-4.5)

Paper &
paperboards

30,352(-4.4)

15,377(0.7)

15,391(2.0)

30,768(1.4)

15,164(-1.4)

15,326(-0.4)

30,490(-0.9)

30,639(0.5)

Cement

75,908(-5.2)

33,840(-7.6)

37,108(-5.6)

70,948(-6.5)

33,252(-1.7)

36,354(-2.0)

69,606(-1.9)

68,000(-2.3)

Ethylene

7,205(-4.8)

3,504(-1.4)

3,779
(3.4)

7,283
(1.1)

3,502
(-0.1)

3,827
(1.3)

7,329
(0.6)

7,386
(0.8)

Food

96.5
(-2.5)

97.3(-0.9)

94.5(-0.4)

95.9(-0.7)

96.1(-1.2)

93.9(-0.6)

95.0(-0.9)

94.9(-0.1)

Textile64.1(-9.3)

59.4(-10.6)56.8(-8.2)

58.1(-9.4)

54.6(-8.0)

53.0(-6.6)

53.8(-7.3)

51.2(-4.8)

Non-ferrous
metals104.7(-1.1)

100.7(-2.2)

112.8
(5.9)

106.8
(1.9)

102.1
(1.3)

114.6
(1.6)

108.3
(1.5)

110.7
(2.2)

Metals &machinery

96.4(-14.7)

99.0
(0.9)

103.7
(9.6)

101.3
(5.2)

103.0
(4.0)

108.9
(5.0)

105.9
(4.5)

111.6
(5.4)

Miscellaneous
86.1
84.0
86.4
85.2
83.3
manufacturing(-6.5)(-3.3)(1.3)(-1.0)(-0.8)
Note: Numbers in parentheses denote year-to-year rates of change in percentage.
Source: omnibus data, forecast by IEEJ

87.0
(0.8)

85.1
(-0.0)

85.6(0.6)

Manufacturing indicators(Base year 1995 = 100)

Commodity output
volume(in thousands of

Steel

Cement production is estimated to be down 1.9% per annum on account of thedecrease in public works, and paper and paperboard production is expected to show a
year-to-year decline of 0.9% due mainly to lower shipment levels of corrugatedcardboard containers for transport. Overall industrial production is forecast to grow two
consecutive years , increasing by 2.7% from the previous year.
In FY 2004, manufacturing activities are expected to maintain their strength
continuously led by capital spending and exports. Steel production is estimated to be at
approximately 108.7 million tonnes, a decrease of 0.9% from the previous year. Ethylene
production will likely come in at around 7.4 million tonnes, an increase of 0.8%, andcement output is expected to fall by 2.3% due to a further decline in public investment,
while private business investment will continue to grow. Industrial production, as awhole, is forecast to rise by 3.6%, mainly driven by a continuation of the robust
performance of electronic equipment and other machinery industries.

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IEEJ: March 2004

2. Energy Supply and Demand Outlook for FY 2003 and 2004
2-1 Outlook for Domestic Primary Energy Supply
Domestic energy supply for FY 2003 is forecast to be almost flat, down 0.2% fromthe previous year, as the cool summer weather more than offset the impact ofcontinuing economic growth (Table 2-1, Exhibit 2-1). By energy source, the start-up of
new generation facilities will increase coal-fired power generation, and coal-basedenergy supply is estimated to rise by 3.7% for the year. Petroleum-based energy supply
is also likely to increase for the second straight year by 1.1% due to higher electricity
generation from oil. Natural gas-based energy supply is forecast to increase by 5.6% as a
combined result of higher town gas use and increased levels of gas-fired power
generation.
Table 2-1: Domestic primary energy supply outlook (reference case)10

FY 2001(Actual)99,348(0.8)

FY 2002 (Actual)stnd
2 HalfTotal
1 Half50,59652,581 103,177(-0.5)(8.4)(3.9)(Units:: 10 kcal = 1,000 TOE)
FY 2003 (Forecast)
FY 2004stnd(Forecast)
1 Half
2 Half
Total
53,02054,009 107,029 107,056
(4.8)
(2.7)
(3.7)
(0.0)

Oil

258,682(-3.2)

114,771(-5.3)

145,919(6.1)

260,690(0.8)

119,079(3.8)

144,441(-1.0)

263,519(1.1)

256,029(-2.8)Natural gas

72,006(-1.9)

34,716(-6.2)

39,588(13.2)

74,304(3.2)

38,066(9.7)

40,379(2.0)

78,446(5.6)

77,158(-1.6)

Hydro

18,638(-3.2)

10,927(2.3)

7,247(-8.9)

18,174(-2.5)

12,788(17.0)

7,470
(3.1)

20,258(11.5)

18,911(-6.6)

Nuclear

68,770(-0.7)

36,480(6.7)

26,965(-22.0)63,445(-7.7)

23,250(-36.3)

26,536(-1.6)

49,786(-21.5)

66,212(33.0)

Others7,024(-4.2)

3,566
(1.0)

3,556
(1.7)

7,122
(1.4)

3,522
(-1.2)

3,527(-0.8)

7,048(-1.0)

6,987(-0.9)

Total

524,468(-2.0)

251,056(-2.5)

275,856(3.3)

526,912(0.5)

249,725(-0.5)

276,360(0.2)

526,085(-0.2)

532,353(1.2)

Real gross domestic expen 530,370(-1.2)

263,902(0.1)

272,707(2.2)

536,609(1.2)

269,481(2.1)

279,644(2.5)

549,125(2.3)

558,406(1.7)

93.4(-2.4)

92.9(-0.5)Coal

GDP intensity

96.4
95.7
(-0.8)(-0.7)
Source: IEEJ (Numbers for FY 2002 are preliminary)Notes: 1. Numbers in parentheses denote year-to-year rates of change in percentage.
2. Others include geo-thermal generation and new energy sources.

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IEEJ: March 2004

Exhibit 2-1: Domestic primary energy supply outlook (By primary energy source)
Rate of growth (%)

4
Forecast

3
1.8

2

1.2

1.7

1.0

1
0

0.2

-1

0.5

▲0.2

2002

2003

▲1.9

-2

▲2.0

-3
-4
1996

1997

1998

Coal
Nuclear

1999

2000

2001

Oil
Hydro & others

2004

Natural gas
Total

Source: same as table 2-1

Hydropower generation will likely register a large year-on-year increase of 11.5%
due to record-high water levels. Nuclear power generation, on the other hand, is
expected to fall by as much as 21.5% due to lower capacity utilization as a result of thelong-term suspension of operation at certain nuclear power stations.
In FY 2004, a fall in steel and cement production will cause coal-based energy
supply to stay flat. Petroleum-based energy supply will likely decrease by 2.8% due to afall-off in oil-fired power generation as suspended nuclear power stations resume
operation. Despite an increased use in town gas, natural gas-based energy supply is
forecast to be down 1.6%, as gas-fired power

generation will be lower than theprevious year’s level. Hydropower generation is seen declining by 6.6% with the waterflow rate

returning to the average year levels from highs in FY 2003. Finally, nuclear

power generation is expected to be 33% higher, as capacity utilization will rebound fromthe lows in the previous year. As a result of the above, domestic primary energy supply
is forecast to increase by 1.2% in FY 2004.
2-2 Outlook for Final Energy Consumption
We forecast final energy consumption in FY 2003 to be down 0.2% year-on-year(Table 2-2, Exhibit 2-2). Consumption in the industrial sector will likely be almost flatwith the preceding year’s level, as the positive impact of a production recovery in autoand IT-related industries will be offsetting the drag from the cold summer. In thehousehold sector, energy consumption is expected to decline by 0.4% due to lower
demand for cooling and air/water heating from the cold summer and winter warmer
7

IEEJ: March 2004

than last, respectively. Gradual economic recovery will make commercial demand
increase by 0.6% on the back of a in spite of lower air conditioning consumption insummer. Consumption in the transport sector will likely be 1.2% lower; fuel demand forpassenger transport by cars and others will remain firm notwithstanding theunseasonable weather that typically discourages people to travel, e.g., cold
temperatures and high precipitation in summer, but freight transport fuel demand will
decrease by 1.2% in response to the lower vehicle count and improved fuel economy ofdiesel trucks.

By type of energy consumed

By economic sector

Table 2-2: Final energy consumption outlook (reference case)
10(Units:: 10 kcal = 1,000 TOE)
FY 2003 (Forecast)
FY 2001
FY 2002 (Actual)
FY 2004
stnd
st
nd(Actual)(Forecast)
1 Half
2 HalfTotal
1 Half
2 Half
Total
170,853
82,35391,067 173,420
82,17991,376 173,555 174,950
Industrial Sector(-4.1)(-0.3)(3.2)(1.5)(-0.2)
(0.3)
(0.1)
(0.8)
98,723
43,13859,170 102,308
43,69758,642 102,340 104,697
Residential &Commercial Sector(-1.0)(-0.2)
(6.6)
(3.6)
(1.3)
(-0.9)(0.0)(2.3)
52,221
20,28533,96954,254
20,68933,32654,01554,930Residential sector(-2.2)(-1.7)
(7.5)
(3.9)
(2.0)
(-1.9)(-0.4)(1.7)
46,50222,85325,201
48,05423,00925,31648,32549,767
Commercial sector
(0.3)
(1.2)
(5.4)
(3.3)
(0.7)
(0.5)
(0.6)
(3.0)
91,05045,56145,49991,05944,61845,32489,94189,659Transport sector(0.3)(-0.6)(0.6)(0.0)(-2.1)(-0.4)(-1.2)(-0.3)
6,879
3,008
3,661
6,669
3,006
3,692
6,698
6,830
Non-energy consum(-4.0)(-4.2)(-2.1)(-3.1)(-0.1)
(0.8)
(0.4)
(2.0)
39,62919,992
20,22940,221
19,98320,08040,06339,882
Coal and others(-4.2)
(0.3)
(2.7)
(1.5)
(-0.0)(-0.7)(-0.4)(-0.5)
98,873 121,164 220,037
98,021 120,283 218,304 219,517
Petroleum products 217,898(-1.8)(-1.3)(2.9)(1.0)(-0.9)(-0.7)(-0.8)(0.6)
23,61910,945
13,924
24,86911,541
13,99525,536
26,529Town gas(-4.2)
(1.9)
(8.1)
(5.3)
(5.4)
(0.5)
(2.7)
(3.9)
82,00042,026
41,81883,844
41,77842,446
84,22485,88
4Electricity(-1.5)
(0.7)
(3.9)
(2.2)
(-0.6)
(1.5)
(0.5)
(2.0)
4,361
2,225
2,262
4,487
2,178
2,229
4,407
4,323
Others(-4.9)
(2.0)
(3.8)
(2.9)
(-2.1)(-1.5)(-1.8)(-1.9)
367,507 174,061 199,397 373,458 173,501 199,033 372,534 376,136
Total(-2.2)(-0.4)(3.4)(1.6)(-0.3)(-0.2)(-0.2)(1.0)
Source: IEEJ (Numbers for FY 2002 are preliminary)Notes: 1. Numbers in parentheses denote year-to-year rates of change in percentage.
2. “Coal and others” include coke, coke-oven gas, blast furnace gas, and briquette coal.

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IEEJ: March 2004

Exhibit 2-2: Final Energy Consumption Outlook(Contribution by economic sector)
Rate of growth (%)
42

Forecast

2.8

3

1.6
1.3

1.0

0.8

1

0.7

0
▲0.2

▲0.9

-1
-2

▲2.2

-3
1996

1997

1998

1999

Industrial
Commercial
Non-energy consumption

2000

2001

2002

2003

2004

Residential
Transport
Total

Source: same as table 2-2

In FY 2004, we see industrial energy demand growing at 0.8% year-on-year.
Demand from the household sector is forecast to be up 1.7%, with an assumption of
more normalized weather patterns. Commercial demand is seen rising by 3.0% for thesame reason. Transport consumption, however, is projected to fall again by 0.3% due tocontinued weakness in fuel demand for freight transport. With demand from the threesectors combined, we forecast final energy consumption will record a positive
year-to-year growth rate of 1.0%.
2-3 Energy Demand Outlook by Type of Energy Consumed
2-3-1 Electricity
The total amount of electricity sold in FY 2003 by electric utilities is expected toincrease by 0.4% from the previous year (Table 2-3). Residential usage will likely
decrease by 0.1% due to unseasonable weather and other factors, but commercial
demand is forecast to increase by 0.9% on the back of economic expansion. Demand fromlarge users (for use under specified contracts of 2,000 kW or more) is forecast to be up
1.1% with increased industrial usage of electricity led by machinery industry.

9

IEEJ: March 2004

Table 2-3: Electricity demand outlook by type of use (reference case)(Units:: millions of kWh)FY 2001

Small-to medium-user demand (not under
specified contracts)(Actual)Lighting use

Power use

Commercial use
Small users

High voltage B andothers

FY 2002 (Actual)
1st Half

2nd Half

FY 2003 (Forecast)Total

1st Half

2nd Half

FY 2004
Total(Forecast)

254,470

124,662

138,777

263,439

122,726

140,501

263,227

268,562(-0.0)

(0.9)

(6.0)

(3.5)

(-1.6)(1.2)(-0.1)(2.0)

358,303

185,949

176,456

362,405

183,495

179,692

363,187

371,235(-1.5)(-0.8)

(3.2)

(1.1)

(-1.3)

(1.8)

(0.2)

(2.2)

159,197

84,04478,508

162,552

83,78280,311

164,093

167,725

(0.8)

(0.3)

(4.1)

(2.1)

(-0.3)

(2.3)

(0.9)

(2.2)

112,049

58,05854,303112,361

56,38755,273

111,660

114,296(-3.2)(-1.9)

(2.8)

(0.3)

(-2.9)(1.8)(-0.6)(2.4)

87,057

43,84743,64587,492

43,32644,10887,434

89,215(-3.1)(-1.3)

(2.3)

(0.5)

(-1.2)(1.1)(-0.1)(2.0)

Lighting & power
total

612,773

310,611315,233

625,844306,221

320,193

626,414

639,797(-0.9)(-0.1)

(4.4)

(2.1)

(-1.4)

(1.6)

(0.1)

(2.1)

Large-user demand (under
specified contracts)

231,602120,613

116,475

237,088

120,988

118,656

239,644244,035(-3.5)

(0.7)

(4.1)

(2.4)

(0.3)

(1.9)

(1.1)

(1.8)

844,374

431,224

431,707862,931427,210438,849

866,059

883,832

The total amount ofelectricity sold(-1.6)
(0.1)
(4.4)
(2.2)
(-0.9)
(1.7)
(0.4)
(2.1)
Note: Numbers in parentheses denote year-to-year rates of change in percentage
Source: Ministry of Economy, Trade and Industry, Monthly Electricity Survey and Statistics (Denryoku Cyosa Tokei Geppo), forecast by IEEJ

Turning to FY 2004, we expect residential demand to turn up, absent adverse
weather conditions, with a year-to-year increase of 2.0%. Commercial demand is likely
to grow further by 2.2%. Demand from large users will also likely increase by 1.8% withhigher manufacturing activities. The net of these segment demands is a forecast of a
2.1% increase in the total amount of electricity sold, an increase for the third
consecutive year.
2-3-2 Town Gas
The total amount of town gas sold in FY 2003 is forecast to be up 4.7% (Table 2-4).
Demand for residential use will likely increase by 1.4% as a combined result of elevatedwater heating demand in summer due to lower water temperatures and diminisheddemand in winter due to warmer weather conditions. Industrial demand is expected torise by 9.1% with particular strength in the areas of power generation (by cogenerationequipment users and electric utilities). Commercial and other usage will both likely be
up 1.2% and 3.3% on account of higher water heating demand in summer and increased
installation of HVAC equipment.

10

IEEJ: March 2004

Table 2-4: Town gas demand outlook (reference case)3(Units:: millions of m /10,000 kcal)
FY 2001
FY 2002 (Actual)
FY 2003 (Forecast)
FY 2004(Actual)
1st Half
2nd Half
Total
1st Half
2nd Half
Total(Forecast)
9,355
3,632
6,040
9,673
3,906
5,906
9,812
9,917
Residential(-1.4)(-0.4)
(5.8)
(3.4)
(7.5)
(-2.2)
(1.4)
(1.1)
4,104
2,194
2,152
4,346
2,271
2,129
4,400
4,614
Commercial
(1.1)
(2.3)
(9.8)
(5.9)
(3.5)
(-1.1)
(1.2)
(4.9)
9,763
5,282
5,741
11,023
5,795
6,236
12,031
12,624
Industrial(4.5)(10.5)(15.2)(12.9)
(9.7)
(8.6)
(9.1)
(4.9)
2,183
1,103
1,289
2,392
1,162
1,309
2,472
2,690
Others
(3.0)(4.1)(14.7)
(9.6)
(5.3)
(1.6)
(3.3)
(8.8)
25,406
12,212
15,222
27,434
13,134
15,58028,71429,845The total amountof town gas sold
(1.6)
(5.0)
(10.5)
(8.0)
(7.6)
(2.4)
(4.7)
(3.9)
Note: Numbers in parentheses denote year-to-year rates of change in percentage.
Source: Ministry of Economy, Trade and Industry, Monthly Gas Industry Statistics (Gasu Jigyo Tokei Geppo) et al., forecast by IEEJIn FY 2004, despite the expectation that gas demand for power generation would
stabilize, industrial demand will likely continue to grow at an estimated 4.9% clip. The
growth in residential gas demand is expected to be somewhat slower at 1.1% after a
spike in the previous year. Commercial and other usage of gas is expected to stay on a
growth path, due partly to increased penetration of gas air-conditioning (cooling). The
total amount of town gas sold in FY 2004, as a net result, is forecast to increase by 3.9%.
2-3-3 Petroleum Products
The sales of fuel oils in FY 2003 are expected to grow for the second straight year at
a rate of 0.3% (Table 2-5). Gasoline consumption will likely be almost flat with anincrease of 0.4% and influenced by unseasonable weather conditions, e.g., cold summer,
and other factors. In expectation of a winter warmer than the last, demands forkerosene and grade A fuel oil is seen slipping by 1.5% and 0.1%, respectively. Gas oil
consumption is likely to continue to fall in line with declining freight volume. Despite adecrease in industrial demand, consumption of grade B and C crude oils combined is
expected to increase for the second consecutive year by 9.1%. This is due to a hike in oil
demand for power generation use, as a result of the long-term suspension of operation
at certain nuclear power stations.
Looking to FY 2004, we expect gasoline consumption to show modest growth, but
the fall in demand for gas oil to persist. Numbers for kerosene and grade A fuel oil will
have an easier, positive comparison against warm winter in the previous year. The highvolume of ethylene production will increase naphtha output. Consumption of grade B
and C crude oils will drop against a tough year-on-year comparison. As a result, thesales of fuel oils in FY 2004 are expected to decline by 1.4%.

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IEEJ: March 2004

Table 2-5: Outlook on domestic demand for petroleum products/fuel oils (reference case)(Units: in thousands of kiloliters)
FY 2001

FY 2002 (Actual)

FY 2003 (Forecast)

FY 2004(Actual)

1st Half

2nd Half

Total

1st Half

2nd Half

Total(Forecast)Gasoline

58,817(0.8)

30,544(1.8)

29,375(2.0)

59,918(1.9)

30,485(-0.2)

29,678(1.0)

60,164(0.4)

60,813(1.1)

Naphtha46,032(-3.5)

23,054(3.8)

25,530(7.2)

48,585(5.5)

22,550(-2.2)

25,801(1.1)

48,352(-0.5)

48,720(0.8)

Jet fuel

4,998
(8.5)

2,316
(-5.3)

2,290(-10.3)4,605(-7.9)

2,167(-6.4)

2,356
(2.9)

4,522
(-1.8)

4,627
(2.3)

Kerosene

28,506(-4.7)

7,474(-1.6)

23,152(10.7)

30,626
(7.4)

7,730
(3.4)

22,427(-3.1)

30,157(-1.5)

30,953(2.6)

Gas oil

40,925(-2.0)

19,665(-3.4)

19,833(-3.5)

39,498(-3.5)

18,782(-4.5)

19,236(-3.0)

38,018(-3.7)

36,948(-2.8)

Grade A fuel oil

29,302(-0.7)

13,018(1.1)

17,119(4.2)

30,136(2.8)

13,144(1.0)

17,009(-0.6)

30,152(0.1)

30,532(1.3)

Grade B & C fuel oil

27,613(-12.0)12,038(-16.4)

17,480(32.2)

29,518(6.9)

15,031(24.9)

17,183(-1.7)

32,214(9.1)

27,467(-14.7)

Grade C fuel oil for
power generation

8,686(-25.4)3,151(-39.2)

7,693(119.4)

10,844(24.8)

6,376(102.3)7,196(-6.5)

13,572(25.2)

7,928(-41.6)

The total amount offuel oils sold236,192(-2.9)

108,108(-1.6)

134,778(6.7)

242,887(2.8)

109,889(1.6)

133,690(-0.8)

243,579(0.3)

240,060(-1.4)

Note: Numbers in parentheses denote year-to-year rates of change in percentage
Source: Ministry of Economy, Trade and Industry, Monthly Statistics on Resources and Energy (Shigen Enerugi Tokei Geppo) et al., forecast by IEEJ12IEEJ: March 2004

3. Impacts of Parameter Changes on Energy Supply and Demand in FY 2004
3-1 Sensitivity Analysis
In order to see varied impacts of parameter changes on energy supply and demand,
we conducted a sensitivity analysis to such changes focusing on the outcome for FY
2004.
In a sensitivity analysis, we change key exogenous variables to see impacts onenergy demand incurred by those changes. One at a time is changed while holding theother assumptions constant as they were in the reference case. The analysis herein
focuses on such variables that are considered to involve higher levels of uncertainty inthe short-term, namely crude oil prices and real GDP, and evaluate various impacts
their changes could have on general economic activities and, specifically, energy supply
and demand, in FY 2004 (Exhibit 3-1, Table 3-1).
Exhibit 3-1: Diagram of sensitibity analysis
Measurement of impacts from changes in parameter
Reference caseSensitivity
analysis

FY 2004 real GDP growth: 1.7%
FY 2004 crude oil price: $25/bbl

A case of higher oil prices

A case of lower oil prices

FY 2004 crude oil price: $30/bbl (+$5)$20/bbl (-$5)

A case of high growth

A case of low growth

FY 2004 real GDP growth: 2.2% (+0.5 pp):1.2% (-0.5 pp)

Nuclear power stations

Earlier-/Later-than-expected resumption of operation

Temperature fluctuations

1 °C changes in summer and winter temperatures

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IEEJ: March 2004

Table 3-1: Results of sensitivity analysis
FY 2004
Case

Real GDP

Reference

FY 2003549.1

Higher oil prices(1995 prices in trillions of yen)

Lower oil prices
Higher growth
Lower growth
Reference

CPI

98.1

Higher oil prices(base year 2000 = 100)

Lower oil prices
Higher growth
Lower growth

Domestic primary energy supply

Reference

568.7

Higher oil prices(in million kiloliters of crude oil
equivalent)

Lower oil prices
Higher growth
Lower growth

Final energy consumption

Reference

402.7

Higher oil prices(in million kiloliters of crude oil
equivalent)

Lower oil prices
Higher growth
Lower growth

The total amount of electricity sold

Reference

8,661

Higher oil prices(in 100 millions of kWh)

Lower oil prices
Higher growth
Lower growth

The total amount of town gas sold

Reference

28,714Higher oil prices(in millions of m3/10,000 kcal)

Lower oil prices
Higher growth
Lower growth

The total amount of fuel oils sold

Reference
Higher oil prices(in ten thousands of kiloliters)

Lower oil prices
Higher growth
Lower growth

24,358Difference from reference case

Rate of y-oy growth (%)

558.4
556.8
559.9
561.2
555.8
98.0
98.1
98.0
98.1
98.0
575.5
573.9
577.1
576.9
574.0
406.6
405.2
408.0
407.7
405.3
8,838
8,833
8,843
8,849
8,828
29,84529,777
29,91029,926
29,76323,98823,897
24,10824,09423,897( 1.7)( 1.4)( 2.0)( 2.2)( 1.2)(-0.1)(-0.0)(-0.2)(-0.1)(-0.1)( 1.2)( 0.9)( 1.5)( 1.4)( 0.9)( 1.0)( 0.6)( 1.3)( 1.2)( 0.6)( 2.1)( 2.0)( 2.1)( 2.2)( 1.9)( 3.9)( 3.7)( 4.2)( 4.2)( 3.7)(-1.5)(-1.9)(-1.0)(-1.1)(-1.9)

ChangeChange ingrowth rate
(pp)

-1.6
1.4
2.7
-2.7

(-0.3)( 0.3)( 0.5)(-0.5)

0.1
-0.1
0.0
-0.0

( 0.1)(-0.1)( 0.0)(-0.0)

-1.6
1.5
1.3
-1.5

(-0.3)( 0.3)( 0.2)(-0.3)

-1.4
1.4
1.1
-1.3

(-0.4)( 0.3)( 0.3)(-0.3)

-4.9
4.5
10.7
-10.1

(-0.1)( 0.1)( 0.1)(-0.1)

-67.7
64.9
80.9
-82.3

(-0.2)( 0.2)( 0.3)(-0.3)

-91.0
120.2
106.3
-91.4

(-0.4)( 0.5)( 0.4)(-0.4)

3-1-1 A Case of Higher Oil Prices
The case is defined as that where the crude oil prices will move around an averageof US$30 per barrel (CIF, imported) in FY 2004, a level $5 higher than $25/bbl assumed
in the reference case. This would result in a projected real GDP growth rate of 1.4%
year-on-year, which is lower than that in the reference case by 0.3 percentage points.
What is worth noting is that the Japanese economy is less dependent on oil than it wasat the times of the two oil crises, and it is less prone to the adverse effects of higher oil
prices.

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IEEJ: March 2004

As for the impacts on energy balances, growth in domestic primary energy supply
would be 0.3 percentage points lower at an increase of 0.9%, while that in final energy
consumption would be 0.4 percentage points lower at an increase of 0.6%, bothcompared against the reference case.
3-1-2 A Case of Lower Oil Prices
The case is defined as that where the crude oil prices will move around an averageof US$20 per barrel (CIF, imported) in FY 2004, a level $5 lower than $25/bbl assumed
in the reference case. This would result in a projected real GDP growth rate of 2.0%
year-on-year, which is higher than that in the reference case by 0.3 percentage points.
As for the impacts on energy balances, growth in domestic primary energy supply
would be 0.3 percentage points higher at an increase of 1.5%, while that in final energy
consumption would be 0.3 percentage points higher at an increase of 1.3%, bothcompared against the reference case.
3-1-3 A Case of High Growth
The case is defined as that where the real GDP growth rate will be 2.2% in FY 2004,
a level 0.5 percentage points higher than the 1.7% assumed in the reference case. This
could possibly be caused by ripple effects through which higher production and capitalspending in export-oriented industries positively influence the performance of otherindustries and, in due time, levels of consumption.
As for the impacts on energy balances, growth in domestic primary energy supply
would be 0.2 percentage points higher at an increase of 1.4%, while that in final energy
consumption would be 0.3 percentage points higher at an increase of 1.2%, bothcompared against the reference case.
3-1-4 A Case of Low Growth
The case is defined as that where the real GDP growth rate will be 1.2% in FY 2004,
a level 0.5 percentage points lower than 1.7% assumed in the reference case. This could
possibly be caused by a decline in exports due to a slowdown in the US and/or Asian
economies, as well as a decrease in domestic demand, especially private business
investment.
As for the impacts on energy balances, growth in the domestic primary energy
supply would be 0.3 percentage points lower at an increase of 0.9%, while that in final
energy consumption would be 0.3 percentage points higher at an increase of 0.6%, bothcompared against the reference case.

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IEEJ: March 2004

3-2 Contingency Scenarios
3-2-1 Resumption of operation of nuclear power plants
While there is still uncertainty as to when operation of nuclear power plants undersuspension will be resumed, we have assumed two contingencies: earlier-than-expected
resumption and later-than-expected resumption, and then analyzed their impacts onenergy balance (i.e., fuel demand for thermal power generation) and on CO2 emission
levels.
In the reference case, it was assumed that one-half of suspended nuclear power
stations would resume operation in the summer of 2004 and the other half in the fall.
The scenario of earlier-than-expected resumption assumes that the resumption would
be three months earlier, while that of later-than-expected resumption assumes that it
would be three months later. We will, then, analyze the influences of the respective
scenarios (Table 3-2).

Table 3-2:

Contingency scenarios regarding the resumption of operation of nuclear power plants under long-term suspension
Plants currently under inspectionor already inspected

Plants currently under repair

Reference caseresume operation in summer 2004

resume operation in fall 2004

Earlier-than-expected resumption (by three months)

resume operation in spring 2004

resume operation in summer 2004

Later-than-expected resumption (by three months)

resume operation in fall 2004

resume operation in winter 2004

Earlier-than-expected resumption would result in a decline in demand for grade C
fuel oil of approximately 4 million kiloliters (kl) and a decrease in CO2 emissions by 4
million tons carbon equivalent (MtC), both compared against the reference case.
Later-than-expected resumption would result in a rise in demand for grade C fuel oil ofapproximately 5 million kiloliters (kl) and an increase in CO2 emissions by 4 million
tons carbon equivalent (MtC), both compared against the reference case (Table 3-3).
Table 3-3: Influences of different scenarios regarding full resumption of nuclear power generation
Nuclear power generation (excluding Fugen)
Electricity generated

Capacity utilization(in 100 millions of kWh%

Fuel demand forthermal power
generation(in millions ofkiloliters of grade C
fuel oil equivalent)

CO2emission(in million tons ofcarbon equivalent)

FY 2001

Actual

3,175

80.3

108

312

FY 2002

Actual

2,941

73.4

115

318

FY 2003

Forecast

2,316

57.8

126

326

FY 2004

Reference case

3,080

76.9

114

319

Earlier-than-expected resumption

3,283

81.9

110

316

(Changes from reference case)

(203)

(5.1)

(-4)

(-3)

Later-than-expected resumption

2,837

70.8

120

323

(Changes from reference case)(-243)(-6.1)

(5)

(4)

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IEEJ: March 2004

3-2-2 Temperature Fluctuations
We have also analyzed the influences of temperature fluctuations in summer andwinter on energy demand by consumer type and by type of energy consumed (Table 3-4).
We have assumed a case where summer temperatures in the July–September period are
1°C higher than the average year and one where winter temperatures in theJanuary–March period are 1°C lower than the average year.
Table 3-3: Influences of different scenarios regarding full resumption of nuclear power generation
Nuclear power generation (excluding Fugen)
Electricity generated

Capacity utilization(in 100 millions of kWh%

Fuel demand forthermal power
generation(in millions ofkiloliters of grade C
fuel oil equivalent)

CO2emission(in million tons ofcarbon equivalent)

FY 2001

Actual

3,175

80.3

108

312

FY 2002

Actual

2,941

73.4

115

318

FY 2003

Forecast

2,316

57.8

126

326

FY 2004

Reference case

3,080

76.9

114

319

Earlier-than-expected resumption

3,283

81.9

110

316

(Changes from reference case)

(203)

(5.1)

(-4)

(-3)

Later-than-expected resumption

2,837

70.8

120

323

(Changes from reference case)(-243)(-6.1)(5)(4)

Under such scenarios, a hotter summer would cause domestic primary energy
supply and final energy consumption to increase by 0.6 percentage points and 0.5
percentage points, respectively, compared against the reference case. It would also
increase the sales of electricity, town gas, and fuel oils by 0.8, 0.5, and 1.3 percentage
points each. A colder winter would, on the other hand, cause both domestic primaryenergy supply and final energy consumption to increase by 0.6 percentage points. As for
its consumption breakdown, an increase in demand for town gas would be most notablewith its sales jumping up by 2.4 percentage points, as such temperature changes in
winter would greatly affect both air- and water-heating demand.
Contact: ieej-info@tky.ieej.or.jp

17