Iran Crisis: Japan’s Energy Security Risk Revealed

Global energy supply disruptions are exposing vulnerabilities in nations heavily reliant on single sources, with Japan now facing challenges similar to those recently experienced by Germany. Both countries’ energy policies have left them susceptible to geopolitical instability and price shocks.

Germany’s Dependence on Russian Energy

Prior to the 2022 Russian invasion of Ukraine, Germany significantly increased its dependence on Russian oil and gas, driven by economic factors and a belief in fostering political change through economic cooperation. Germany’s Energiewende policy aimed to phase out nuclear and coal while expanding renewable energy sources. By 2021, Russia supplied 55% of Germany’s natural gas.

Japan’s Reliance on Middle Eastern Oil

Japan is now confronting a similar situation. For decades, the country secured its energy supplies through deep ties with Gulf nations, benefiting from abundant and affordable fossil fuels. Before the recent conflicts, Japan imported over 90% of its crude oil and approximately 11% of its LNG from the Middle East, with Saudi Arabia and the UAE as primary suppliers. Approximately 95% of Japan’s Middle Eastern oil supply is now effectively blocked due to disruptions in the Strait of Hormuz.

The disruption has impacted Japan’s financial markets, with the Nikkei 225 experiencing significant declines and business confidence in the services sector falling to its lowest level since the pandemic. The IMF has projected Japan’s economy will grow by 0.8% in 2026, but could contract by 3% if the fuel crisis continues. Household electricity bills are expected to rise by ¥15,000 (USD $95) from April 2026 due to increased LNG import costs.

Japan’s Response to the Crisis

The Japanese government has taken several steps to address the crisis, including releasing up to 90 million barrels from its national and private reserves – enough for 45-50 days of domestic supply. State subsidies have been reinstated to stabilize gasoline prices, capping them at ¥170 per litre after reaching a record high of over ¥190 per litre. Japan is also reducing its reliance on oil-fired power generation and increasing the utilization of coal-fired thermal power plants, securing coal supplies from Australia and Indonesia, and allowing older coal-fired equipment to operate for an additional year starting in April 2026.

Efforts are underway to secure alternative oil sources from Central Asia, South America, and Canada, with negotiations ongoing with Venezuela. Following discussions with the U.S., Japan is exploring a joint effort to boost Alaskan oil production and plans to invest in Alaskan oil infrastructure, including loading facilities, as part of a $550 billion bilateral investment program. Oil from Alaska takes approximately 12 days to reach Japan, compared to over 20 days from the Middle East.

Long-Term Energy Strategy

Looking ahead, Tokyo is prioritizing renewable energy sources, aiming for up to 50% of the electricity mix by 2040. Policy changes now allow for offshore wind development in Exclusive Economic Zones, with a goal of increasing wind’s share of electricity from 1% to 8% by 2040. Subsidies for large-scale, ground-mounted solar power will be phased out from fiscal 2027 to encourage rooftop solar installations.

Japan is also reversing its previous stance on nuclear energy, aiming to maximize its use by extending reactor lifespans and developing next-generation reactors. In January, Tokyo Electric Power Company (TEPCO) restarted Unit 6 of the Kashiwazaki-Kariwa Nuclear Power Station, the world’s largest nuclear plant, following a 15-year shutdown triggered by the 2011 Fukushima disaster. The restart is expected to increase electricity supply to the Tokyo area by roughly 2% and reduce LNG imports. Approximately half of Japan’s 33 operable reactors have now been restarted, with new funding schemes introduced to accelerate the process.