Hormuz Strait Blockade Sends Shockwaves Through Japan’s Economy

Stock markets reacted sharply as crude oil prices surged, with Japan’s benchmark index plunging by more than 4,000 yen at one point during the week, marking the largest drop of the year and fueling concerns of market panic.

At gasoline stations in Tokyo, prices have already climbed past 200 yen per liter, and some stations have posted notices warning customers that fuel deliveries could become difficult, urging motorists to fill up as soon as possible.

The impact is also being felt in supermarkets, where procurement managers say rising transportation costs are becoming a major concern as fuel prices climb. But logistics expenses are only part of the problem.

Supermarket staff warn that packaging materials—such as food trays, plastic wrap and product labels—are also becoming more expensive. If these costs rise further, retailers may have little choice but to pass the burden on to consumers through higher product prices.

Many of these materials, including plastic trays, vinyl bags and other packaging products, are petrochemical goods made from naphtha, a raw material derived from crude oil. Most of Japan’s naphtha imports come from the Middle East.

Since the attack on Iran, the price of naphtha has surged to about 1.4 times its previous level, rising by more than 100 dollars per ton.

Prime Minister Shigeru Ishiba has announced measures such as releasing strategic petroleum reserves and resuming gasoline subsidies to ease the burden on consumers. However, the government has yet to present specific countermeasures for the rising cost and potential shortage of naphtha.

The strain is already being felt by small businesses. In Kawaguchi City, Saitama Prefecture, a family-run bento shop that prides itself on generous portions recently raised prices for the second time in less than a year.

The shop raised prices in April last year due to soaring rice costs, and again last month as chicken prices climbed. Now the owner fears yet another wave of cost increases, this time driven by packaging.

“All of our containers are plastic,” the owner said, holding up the boxes used for the shop’s bento meals. “Food prices are already rising, and if all of these packaging materials go up as well, there may come a point where we simply can’t absorb the costs anymore.”

Customers say they understand the difficult situation but worry about the continuing rise in living expenses.

“It’s tough,” one customer said. “Rice has gone up, meat has gone up, and now this. Of course we hope prices can somehow stay lower.”

Others expressed concern about the global nature of the crisis.

“It’s scary,” another shopper said. “When something happens in another country, the effects spread everywhere. I hope Japanese politicians will think carefully about how to deal with it.”

The effects could spread even further because petrochemical products are used across a vast range of everyday items.

At a specialty store that sells packaging materials and office supplies, staff pointed to plastic food containers, forks and spoons, rubber gloves, binders and clear file folders—all products derived from petroleum.

“When you look around like this, you realize how much of our daily life is surrounded by plastic products,” a store employee said. “If supplies become disrupted, the impact on society could be enormous.”

For now, visible shortages have not yet emerged. But experts warn that the consequences of a naphtha shortage may soon begin to affect households.

Unlike gasoline, which Japan stores in large quantities, naphtha supplies are far more limited.

Naphtha is produced by refining crude oil and is used to create fundamental petrochemical materials such as ethylene and propylene, which in turn become plastics, synthetic fibers, synthetic rubber, detergents and paints.

The government says Japan holds crude oil reserves equivalent to about 254 days of supply, and Chief Cabinet Secretary Yoshimasa Hayashi has stated that there will be no immediate impact.

However, estimates based on preliminary petroleum statistics from the Agency for Natural Resources and Energy suggest that Japan’s naphtha stockpiles amount to only about 14 days.

Producing more naphtha from stored crude oil is not straightforward. Refining crude oil also produces kerosene and diesel at the same time, and limitations in storage capacity make it difficult to increase naphtha output alone.

Analysts say the situation highlights how deeply modern life depends on petroleum.

Japan imports about 97 percent of its crude oil through the Strait of Hormuz, leaving the country highly vulnerable to disruptions in the region. The impact is being amplified by the weak yen, which has depreciated sharply in recent years and makes imported energy even more expensive.

The United States, by contrast, is less directly dependent on Middle Eastern oil thanks to its shale revolution, which has made it the world’s largest crude oil producer and exporter. However, even in the U.S., rising gasoline prices can quickly become a political issue in a car-dependent society.

Experts say the crisis underscores the need for Japan to rethink its energy strategy.

In the short term, policies aimed at energy conservation and the expansion of renewable energy could help reduce vulnerability. Over the longer term, analysts argue that Japan must diversify its primary energy sources and build a more resilient supply structure.

The current disruption, they say, has revealed lingering weaknesses in global supply networks and could once again threaten Japan’s fragile economic recovery if rising energy costs and supply constraints push real wages back into negative territory.

Source: TBS

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