[Japanese Stocks] "Reducing Transmission Losses" is the Key to Solving Power Supply and Environmental Issues, A Potential Market Expanding Worldwide | Revisiting Market Themes. Analysts Unravel the Essence of Themes | Money Creation Monex Securities' Investment Information and Media Useful for Financial Matters.

The Nikkei average saw a boost following news of a resolution in the US tariff negotiations, reaching a level where the possibility of an All-time high update came into view at one point. Since July, it has been pointed out that "while the music is playing, one should enjoy the dance, but at the end of the party, cleanup awaits." However, it seems that "the music is still playing." In fact, in light of the results of the House of Councillors election, where the ruling party faced defeat, there is now the potential for changes in the political framework that could lead to the adoption of active fiscal policies and a weaker yen. These developments are rather considered to lead to an increase in expectations.

The uncertainty in the economy remains strong, and the corporate Q1 earnings results are not exceeding expectations. In the upcoming Q1 earnings releases, it is likely that many will show a cautious outlook. However, these were already anticipated, and to some extent, the negative factors may have already been factored into stock prices. Rather, it seems that the stock market is starting to look even further ahead. The deterioration of the U.S. employment statistics announced on August 1 is a cause for concern, but I perceive that the stock market has not continued to experience panic selling; instead, it has shown resilience. While we should not neglect preparations for the aftermath of the festivities, I would like to maintain the view that the timing for such actions is still ahead.

Extreme heat, AI, data centers, and power consumption are on the rise

Now, let's take up the theme of "power transmission related". The summer of 2025 is also marked by hot days. Recently, a record high of 41.2 degrees Celsius was recorded in Hyogo Prefecture, which can truly be called "killer heat". To avoid the danger to life, air conditioning has become essential both at home and in the office during the day.

However, it seems that we are increasingly entering a vicious cycle where the increase in power consumption leads to further increases in power generation, which in turn contributes to higher emissions of greenhouse gases. It is premature to conclude that greenhouse gases are the sole cause of the extreme heat, but it is likely to be one of the contributing factors, as agreed upon by many.

Moreover, factors such as the successive construction of data centers and the increase in AI operations are not lacking in significantly increasing power consumption. To break this vicious cycle, I anticipate that a "dream-like method" of raising power supply while avoiding the enhancement of power generation that leads to increased greenhouse gas emissions will soon attract attention in the stock market. Although the discussion has not yet heated up to that extent, for that reason, I thought it would be wise to pay attention to related stocks now.

Reducing transmission losses is a win-win solution

So, is there really such a "dream-like method"? In fact, there is. Many of you may already know this, but after electricity is generated at power plants, a considerable amount of power is lost due to electrical resistance during the transmission process to final consumption points such as homes and factories. The current transmission loss rate is estimated to be around 5%, but if we can reduce this loss rate, it would lead to the ideal situation where the amount of electricity available for use in homes and factories increases without changing the generation capacity.

Although a loss rate of 5% may seem negligible, the lost electricity amounts to approximately 45.8 billion kilowatt-hours annually, which corresponds to the annual electricity consumption of about 10-20% of domestic households. Reducing transmission losses can be considered a win-win solution, as it helps to mitigate greenhouse gas emissions, ensures power supply for air conditioning, and alleviates the load on power generation facilities.

Expectations for the Realization of "High-Temperature Superconductivity"

This method has been studied for a long time. Ultimately, it will be the development of "high-temperature superconductivity." The superconducting state, where electrical resistance disappears at temperatures close to absolute zero, was discovered over 100 years ago. The idea is that if this can be achieved in an environment close to room temperature (which is considered "high temperature" compared to super low temperatures), it would eliminate transmission losses.

In 1986, a compound that became superconducting at liquid nitrogen temperatures (around -200 degrees) was discovered, attracting significant attention, and it seems that since 2020, research has been progressing towards the realization of room-temperature superconductivity, albeit under the constraint of high pressure.

It cannot be denied that there are still barriers to practical application, but with the pressing "need" for measures against extreme heat, I hope that the development towards eliminating transmission losses will accelerate.

Japan's power transmission technology is already at a high level, with room for global expansion.

Even if we do not reach the realization of high-temperature superconductivity, I believe that the progress of existing power transmission technologies can hold more realistic expectations. Of course, in emerging countries, it is not uncommon for the transmission loss rate to exceed 10%, and Japan's power transmission technology is already at a quite high level comparable to that of the United States and Europe, which can also be viewed as having limited room for improvement. However, this also suggests that there is a broad potential market for Japan's technology to be offered to the world. This will not only remain in the realm of business but can also lead to actions that mitigate global environmental issues. It is unfortunate that there is no statistic on the world's average power transmission loss rate, but it is not hard to imagine that just a few percentage points of reduction would lead to considerable improvements in energy efficiency and global environmental measures.

In the future, particularly in areas such as ultra-high voltage transmission technology, which Japan excels at, I predict that favorable winds will blow. Furthermore, regarding domestic transmission facilities, as the generation capacity is increasingly becoming constrained, further improvements in efficiency will be essential. To reduce transmission loss rates from the current situation, a higher level of technology that comprehensively controls transmission lines and transformers will be important. These factors will also likely provide strong competitiveness for Japan's technology as it expands overseas.

Electrical work, electric wires, transformers… Key transmission-related stocks to keep an eye on

When listing companies with a market capitalization of over 100 billion yen as related stocks, in the field of electrical construction, companies such as Kinden (1944) and Kandenko (1942) can be mentioned, while in the wire sector, Furukawa Electric (5801), Sumitomo Electric Industries (5802), Fujikura (5803), and SWCC (5805) are notable. In terms of transformer-related companies, Mitsubishi Electric (6503) and Hitachi (6501) can be cited. Notably, the four wire manufacturers are known for advancing research in superconducting technology.

These may not be trending themes at the moment, but they are topics that will surely attract attention in the future, so I hope you will remember them.