As Iran maintains its control over the Strait of Hormuz, Japan’s government will begin releasing oil from its state reserves on Thursday, enough for 30 days of consumption.
This is part of a broader plan to release a total of up to 45 days of reserves – the largest amount ever recorded – along with additional releases from private sector reserves, to minimize disruptions to the world’s fourth-largest economy.
Japan has one of the largest oil reserves in the world, with a supply covering approximately 254 days of consumption between government and private reserves. However, it still imports more than 90% of its crude oil from the Middle East, leaving Japan vulnerable during the US-Israel-Iran war.
While the government has so far avoided imposing strict energy-saving measures, it has warned against compulsive toilet paper purchases amid concerns about supply. Additionally, with fuel prices reaching record highs of 190 yen (US$1.20) per liter, Japan has implemented fuel subsidies to limit the price of gasoline to around 170 yen (US$1.07) per liter.
Japan is better prepared than many of its neighbors for an energy crisis. And it has the oil crises of the 1970s to thank for it.
The world economy was hit by stagflation in the 1970s, triggered by the oil crisis of 1973. Following the Yom Kippur War, Arab oil producers reduced supply and raised prices. Crude oil prices quadrupled in a matter of months, causing a major shock to import-dependent economies like Japan.
The impact was severe. Japan depended on imports for almost all of its oil, and its postwar economic boom stalled abruptly. Panic set in, and in 1974, the Japanese economy contracted for the first time since World War II, ushering in slower growth.
A second crisis, the oil crisis of 1979, sent prices skyrocketing again. But by then, Japan had already begun to adapt: investing in energy efficiency, diversifying energy sources and creating strategic reserves.