Japan taps oil reserves as Iran war spreads. Could it give China leverage?
With Tokyo and Beijing still at loggerheads over Taiwan, analysts warn Japan’s decision exposes its economic vulnerability
Analysts said one reason Tokyo had taken the initiative was that it could not afford to wait for a coordinated IEA response without risking a sharp rise in domestic fuel prices, which would hurt demand and corporate profits.
“Oil released through an IEA-coordinated action may not immediately or perfectly benefit the Japanese market. Factors such as the timing of the release and the structure of the reserves could mean it cannot meet Japan’s needs in the short term,” said Xu Weijun, associate research professor at the Institute of Public Policy at the South China University of Technology.
“Most other nations are more diversified in supply”, he added, noting that higher oil prices would hurt domestic demand and that additional energy subsidies could shake investor confidence in Japan’s fiscal sustainability and the yen.
Tokyo’s decision came as the conflict in the Middle East drags on, with the effective closure of the Strait of Hormuz entering its second week. The trade corridor serves as a critical chokepoint for Japan, which imports more than 90 per cent of its oil from the region, according to Japan’s Ministry of Economy, Trade and Industry.