appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Luna Sun

Japan’s unilateral decision to release oil from its emergency stockpiles highlights its vulnerability to prolonged supply disruptions and may leave it more exposed to economic pressure from China amid tense bilateral relations, according to analysts.
Tokyo announced earlier this week that it planned to release a total of 80 million barrels starting March 16, marking the first time it would independently tap its national reserves. The decision came ahead of a coordinated response by the International Energy Agency (IEA), made up of major oil-consuming nations, which agreed on Wednesday to release a record 400 million barrels.
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.
Xu Tianchen, senior China economist at the Economist Intelligence Unit, said Tokyo’s urgency reflected the fact that it “is the most heavily reliant on oil shipped via the Strait of Hormuz”.
“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.
On Thursday, Mojtaba Khamenei, Iran’s new supreme leader, said the strategic waterway would remain closed as a “tool to pressure the enemy”. But on the same day, its deputy foreign minister Majid Takht-Ravanchi said Iran had allowed ships from some countries to cross the Strait of Hormuz, according to Agence France-Presse.
The Iran conflict will... amplify the effect of Beijing’s existing economic pressure on Tokyo
Xu Weijun, South China University of Technology
Tokyo’s move was intended to cushion supply disruptions rather than address an immediate shortage, but surging energy prices could still fuel inflation, panic financial markets, strain corporate costs and complicate the country’s monetary and fiscal outlook, said Xu Weijun.
Japan’s vulnerability could also reverberate beyond energy markets, leaving it more exposed to pressure from Beijing after ties deteriorated following Japanese Prime Minister Sanae Takaichi's November remarks on Taiwan.
Beijing has since imposed a series of export controls on strategic materials and dual-use items, affecting some Japanese companies and pushing relations to their lowest point in years.
“Japan had previously been able to absorb some of the impact of Chinese restrictions through inventories, alternative sourcing, government subsidies and corporate profit margins, but the Iran conflict will weaken that buffer and amplify the effect of Beijing’s existing economic pressure on Tokyo,” said Xu Weijun.
“Restrictions on key raw materials, dual-use items or specific entities are likely to generate greater marginal pressure on Japan under such conditions”, he added, noting that frictions would centre on strategic and dual-use sectors while broader trade continued at a higher risk premium.
China could be better positioned than Japan to withstand prolonged price volatility because oil and liquefied natural gas (LNG) accounted for a smaller share of its energy mix, analysts said. While a significant share of global LNG supply also transits through the Strait of Hormuz, coal and renewables still dominate domestic power generation in China – a potential buffer against price swings.
Higher oil prices could even ease deflationary pressures in the world’s second-largest economy by pushing up inflation and nominal gross domestic product growth, said Zhuang Bo, global macro strategist at Loomis Sayles, an affiliate of Natixis Investment Managers.
“Paradoxically, higher oil prices could turn into a kind of ‘reflation blessing’ for China,” Zhuang said. “They would support domestic price levels while strengthening the competitiveness and global demand for China’s renewable energy industries such as solar and wind equipment.”
Additional reporting by Carol Yang


Xi ends 3-day Trump visit with promise to meet again in November in China – as it happened

China and EU deadlocked on medical devices, still talking on PHEV curbs: source

Chinese marques in driving seat as high petrol prices accelerate EU shift to electric cars

Xi at White House, trade-war truce extension, Golden Week travel

China trade

Japan taps oil reserves as Iran war spreads. Could it give China leverage?

Japan’s Prime Minister Sanae Takaichi speaks to the media about the release of oil stockpiles at the Prime Minister’s Official Residence in Tokyo on Wednesday. Photo: AFP

Economy

Global Economy

News

Asia

East Asia

China

World

Middle East

With Tokyo and Beijing still at loggerheads over Taiwan, analysts warn Japan’s decision exposes its economic vulnerability


With Tokyo and Beijing still at loggerheads over Taiwan, analysts warn Japan’s decision exposes its economic vulnerability.


Japan taps oil reserves as Iran war spreads. Could it give China leverage?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}With Tokyo and Beijing still at loggerheads over Taiwan, analysts warn Japan’s decision exposes its economic vulnerability

With Tokyo and Beijing still at loggerheads over Taiwan, analysts warn Japan’s decision exposes its economic vulnerability