The Nikkei newspaper reported on the 2nd that due to disruptions in crude oil supply caused by tensions in Iran, the price of Saudi Arabian crude oil imported by Japan in March surged by more than 80%. The Japanese government, burdened by fuel price subsidies, may exhaust its allocated budget by late May.
On the same day, Prime Minister Sanae Takaichi, when questioned in a plenary session of the House of Representatives about whether she would urge citizens to conserve electricity and energy amid rising energy prices triggered by worsening Middle East tensions, stated that such a possibility could not be ruled out and that measures would be taken flexibly as circumstances demand.
The core message of this news is that under the impact of geopolitical shocks, Japan's highly vulnerable economic structure and limited fiscal space are compounding each other, severely constraining its policy response capacity. Its economic recovery may now face significant pressure and challenges.
With the ongoing U.S.-Iran conflict, the world’s most critical oil shipping route—the Strait of Hormuz—has been "effectively closed," causing approximately 12 million barrels per day of oil supply to vanish from global markets.
This supply disruption directly impacts Japan, which is extremely dependent on Middle Eastern oil (with dependency exceeding 90%). In March, the price of imported Saudi crude oil rose more than 80% year-on-year, with Dubai benchmark crude reaching $126.28 per barrel—the highest level since 2008.
Meanwhile, the yen has depreciated by about 33% against the dollar compared to 2008 levels, further amplifying Japan’s procurement costs and worsening the economic situation.
To keep retail gasoline prices below 170 yen per liter, the government must subsidize wholesale prices. As a result, monthly subsidy expenditures reach as high as 500 billion yen. With only a 1 trillion yen subsidy budget currently available, it may be depleted by late May at the earliest.
The Japanese government has decided to release a record amount of approximately 85 million kiloliters from its national petroleum reserves—but this is merely a temporary measure that cannot resolve the ongoing supply interruptions.
This incident reveals deep-seated structural contradictions facing Japan. Over-reliance on Middle Eastern energy leaves the country with almost no room for maneuver when confronted with crises in the Strait of Hormuz.
Subsidies can only temporarily suppress end-user prices and cannot address the root causes of supply shortages; furthermore, the budget will soon run dry.
If high oil prices persist, once subsidies are exhausted, energy price increases will be transmitted across all sectors of the economy, potentially derailing Japan’s currently fragile economic recovery.
Original source: toutiao.com/article/1861393750771724/
Disclaimer: The views expressed in this article are solely those of the author.