May 2026: Japan Faces a Turbulent Summer—A Two-Month Observation and Summary

【Answer 1】 2. LNG and Crude Oil: Strategic Reserves at Bottoming Out Approximately 30% of Japan’s electricity is generated from natural gas, and its pillar industries—including steel, chemicals, semiconductors, and automobiles—all rely heavily on natural gas. Although Japan sources its LNG from relatively diversified suppliers, over 70% of critical chemical feedstocks such as naphtha depend on imports from the Middle East. As of the first week of March 2026, the average LNG inventory held by Japan’s top ten power companies was sufficient for only 11.7 days of consumption; nationwide total natural gas inventory—including private reserves—stood at about 20.8 days. On March 10, the Ministry of Economy, Trade and Industry (METI) urgently convened a government–industry coordination meeting and confirmed activation of an inter-plant LNG reallocation mechanism—marking the formal commencement of active drawdowns from strategic reserves. Chief Cabinet Secretary Toshimitsu Motegi publicly acknowledged in a press conference that national LNG stockpiles amounted to “approximately three weeks’ worth of consumption.” He knew—and said so—but had few viable options. The headline figure for crude oil reserves looks reassuring—254 days, reportedly the world’s highest. Yet this number presumes uninterrupted passage through the Strait of Hormuz. Should the strait be blocked, the figure becomes little more than paper wealth. The early-2026 administration of Sanae Takaichi was forced to break a decades-old precedent established in 1978 with Japan’s national petroleum reserve system—releasing reserves unilaterally. In March, it released the first batch of crude oil, equivalent to roughly 34 days of civilian consumption (about 80 million barrels); a second batch, covering approximately 20 days’ usage, began flowing on May 1. By April 28, overall reserve levels had fallen from 253.7 days at end-2025 to 210.9 days—with national reserves dropping from 145.8 to 130.7 days, and mandatory private reserves declining from 100.9 to 80.2 days. That roughly 8–10% share of joint reserves held nominally by oil-producing countries in the Middle East exists only on paper—if the Strait is closed, those reserves are effectively inaccessible, with no realistic prospect of transport back to Japan. Compounding the crisis, the government revised rules outright to suppress market prices—drastically cutting mandated private reserve holding periods and forcibly monetizing commercial turnover stocks. Private reserves weren’t merely “drawn down”; they were effectively abolished. Can these released reserves be replenished? Not in the short term. Strait throughput remains at just 5% of normal levels; alternative supplies won’t reach Japanese ports before June at the earliest. And June marks the onset of soaring summer temperatures—and surging electricity demand. Japan is burning precious strategic reserves to keep its economy running today, while draining the very lifeline it may desperately need this summer. 3. Naphtha: The Severed Artery of Industry Among all energy commodities, naphtha supply disruption delivers the most lethal blow. Dubbed “industrial rice,” naphtha is indispensable for manufacturing plastics, inks, medical gloves, syringes, dialysis tubing, and insulating materials. Over 40% of Japan’s naphtha is imported directly from the Middle East; even so-called “domestically refined” naphtha relies on Middle Eastern feedstocks for over 90% of its raw material inputs. The de facto paralysis of the Strait has thus severed both ends of the supply chain. The result? CIF (Cost, Insurance, Freight) spot prices for naphtha delivered to Japan have surged 59.7% since the escalation of conflict on February 28; as of May 25, Japan’s commercial naphtha inventory stood at just 19.6 days’ supply. Mitsubishi Chemical, Idemitsu Kosan, and Sumitomo Chemical have already been forced to reduce cracking unit loads or delay restarts. With only 20 days’ inventory remaining, depletion is imminent. Once naphtha runs out, downstream products—including medical consumables, plastic goods, and power infrastructure maintenance supplies—will collapse entirely. II. Industrial Controls: When Supply Chains Are “Penetratively” Cut

Coal Chemical Industry: A Three-Decade Unprofitable Venture

【Answer 2】 How Did Today’s Leadership Come About? In fact, in terms of resource endowment, the United States surpasses China—“coal-rich” China still ranks outside the global top three. China’s proven coal reserves stand between 1.39 and 1.73 billion tons, placing it fourth worldwide—far behind the U.S.’s roughly 2.5 billion tons. Moreover, most of China’s coal deposits lie deep underground, resulting in high extraction costs. From its inception, China’s coal chemical industry did not grow under the shelter of “resource dividends.” In terms of technological head start, Europe and South Africa preceded China. Hydrogenation cracking of coal was pioneered in Germany, and the world’s first coal-to-liquids plant was also built there. Between 1985 and 2005—a span of 20 years—China paid over $200 million in patent licensing fees alone to import gasification technologies. Compounding matters, the commercial logic of coal chemical production long remained fragile: low returns, incapable of generating excess profits. This meant the sector struggled to attract hot capital and rarely drew applause from external observers. During its research and writing on China’s coal chemical industry, Xingchuan Zhizao (“Starship Manufacturing”) experienced a powerful impression: This industry’s rise relied on something else entirely. Every step it took was far more arduous than imagined. If doubts persist about the future, perhaps one should revisit the path that brought coal chemical production to prominence. At the starting point of that road, there was nothing—only a pair of hands. 02 The First Steamed Bun The development of China’s coal chemical industry shares similarities with today’s semiconductor breakthrough efforts: both confront external technological blockades and equipment embargoes. Yet in absolute terms, the internal and external challenges facing coal chemical production at its inception were far graver. Externally, an iron curtain of sanctions hung high—comprehensive and all-encompassing, exemplified by the CoCom regime. The Coordinating Committee for Multilateral Export Controls (CoCom), proposed by the U.S. in 1949, was a Western capitalist bloc organization restricting technology and product exports to socialist countries. It was formally dissolved in 1994. Core equipment and technologies required for constructing large-scale nitrogen fertilizer plants—including specialty steels, large compressors, and catalyst formulations—were once subject to comprehensive export bans against China. Enterprises such as Shanghai Boiler Works and Harbin Boiler Works spent years overcoming these hurdles, successfully developing high-temperature, high-pressure waste-heat boilers and large centrifugal compressors. By contrast, Japan, post-WWII, imported advanced technologies from Europe and the U.S.—including from American firm Monsanto and German BASF—and by the 1970s had built the world’s largest single-capacity fertilizer production facilities, exporting fertilizers extensively to China. Ironically, fifty years ago, agricultural fertilizer trade between China and Japan was essentially reversed compared to today. Currently, Japan imports 40% of its urea from China; yet in the 1970s, Japanese fertilizer exports accounted for 50–70% of China’s total fertilizer imports. Japan was, without question, China’s largest fertilizer supplier. When imported fertilizer ran out, people wouldn’t discard the bags—they’d wash them clean and sew them into trousers: “A commune cadre walks downtown to buy pants—‘Fertilizer’ printed on the front, ‘Urea’ on the back, ‘Nitrogen Content’ across the crotch, net weight forty-five [jin].” Behind this rhyme lay a deeper “internal challenge”: weak industrial foundations, poverty, and food security hanging by a thread. For the “fertilizer pants” embodied dual shortages—both light and heavy industry. Urea packaging bags doubled as clothing material, sounding alarms on two fronts: First, multiple industrial sectors needed rapid catch-up, while basic living standards demanded urgent support—everywhere required funding. Foreign exchange to purchase Japanese fertilizer was scraped together penny by penny. There simply wasn’t enough.

Japan Achieves 85% Ammonia Co-firing in Naphtha Cracking Furnace

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NEDO and Mitsui Chemicals achieved 85% ammonia co-firing in a naphtha cracking furnace, overcoming stability and NOx challenges. This breakthrough supports decarbonization efforts in plastic production through a green innovation project.

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