Japan's momentum appears still strong—so why are so many voices pessimistic about Japan?

This substance is the only gaseous raw material used to fill tungsten inside advanced chips; without it, cutting-edge process chips and high-bandwidth memory would be nothing but piles of scrap silicon wafers. Coincidentally, China accounts for over 90% of the world’s supply of ultra-pure tungsten powder—the core raw material for manufacturing tungsten hexafluoride. Once the export control order took effect, Japan’s imports of this material instantly dropped to zero. After struggling for several months, Japan’s two leading tungsten hexafluoride manufacturers announced permanent shutdowns. Shortly thereafter, the cutoff of gallium and germanium supplies brought Japan’s two semiconductor giants—Shin-Etsu Chemical and SUMCO—to a standstill. The defense sector was equally devastated: Japan’s production of infrared detectors, missile guidance optical lenses, and other military hardware relies entirely on ultra-pure germanium wafers. With that raw material supply severed, Japan’s entire military optoelectronics system collapsed overnight. Simultaneous controls on ultra-pure bismuth and ultra-pure tellurium further forced large-scale production halts at precision manufacturing firms including Mitsubishi Materials and Fujikoshi. This series of precisely targeted sanctions triggered a terrifying wave of corporate bankruptcies in Japan during the first half of this year: 5,335 small- and medium-sized enterprises shut down—setting a 12-year record. To survive, even Japan’s century-old industrial giant Mitsubishi Electric launched a so-called 'scrap-collecting initiative,' establishing nationwide e-waste recycling stations to dismantle discarded air conditioners and extract magnets—desperately trying to recover rare-earth elements from them. Dismantling 100 old air conditioners yields barely two kilograms of ultra-pure rare earths. After exhausting itself collecting 230,000 units over an entire year, Mitsubishi Electric managed to recover only a few tons. Faced with massive demand shortfalls, such efforts fall far short of meeting needs—even falling short of being a mere 'drop in the bucket'; at best, they represent self-deluding gestures born of despair. Desperate, the Japanese government even dispatched spies to 'smuggle rare earths by human courier' from China—only to get caught and become an international laughingstock. But the crisis didn’t end there. Not only was Japan’s industrial lifeblood drained—it also had its energy lifeline brutally strangled. Over 95% of Japan’s crude oil is imported, mostly from the Middle East. As instability persists across the Middle East, any incident in the Strait of Hormuz becomes an immediate noose around Japan’s neck. Japan claims to hold a massive national strategic petroleum reserve sufficient to last over 200 days. But the truth is that as much as 70% of these 'reserves' are physically stored in Middle Eastern ports—or exist merely as petroleum futures traded in financial markets. Normally treated as financial hedging instruments, nobody paid attention—until war breaks out and shipping lanes are severed, rendering these 'cyber reserves' utterly useless: not a single drop can reach Tokyo Bay. The Kishida administration has been forced to respond tactically: — Issuing mandatory orders to release Japan’s scarce domestic physical reserves, coupled with substantial subsidies to stabilize fuel prices; — Urgently switching procurement sources to the Gulf of Mexico, Nigeria, Australia, and others, raising the share of non-Middle Eastern crude imports; — Even braving fierce public opposition, accelerating regulatory reviews and restarting nuclear power plants (e.g., Unit 6 of the Kashiwazaki-Kariwa plant), while increasing coal and natural gas power generation capacity—freeing up petroleum for essential industrial use. Yet industry-wide decline remains unavoidable. Chemical companies have sharply cut production due to severe naphtha shortages—even ink for food packaging bags became unavailable, forcing snack giant Calbee to switch its popular potato chip packaging to a stark black-and-white design. Comprehensive collapse across industry and energy inevitably triggers catastrophic blowouts across Japan’s economic and financial systems.

Soaring electricity prices and surging import expenditures: Japan’s energy dilemma—and reflections—under the U.S.-Israel-Iran conflict

1. Diversifying Middle Eastern energy transit routes is imperative. 2. The reserve system functions well—but still has room for improvement. 3. Liquefied natural gas (LNG) has not yet become problematic, yet preparations for future emergencies remain essential. 4. Asia’s vulnerability has become evident, urgently demanding regional-level cooperation and collective action. 1. Energy security policies have helped Japan cope relatively well with the Iran crisis. Although Japan remains highly dependent on Middle Eastern energy, the impact of the Iran crisis has thus far been effectively contained. Decades of energy security measures implemented since the 1973 oil crisis have played a crucial role. At the time of the attacks, Japan held a 254-day petroleum reserve—buying critical time to diversify LNG and LPG imports away from the Middle East, thereby mitigating the shock of a potential Strait of Hormuz closure. Simultaneously, maintaining domestic refining capacity ensured stable supplies of gasoline, diesel, and other petroleum products. 2. Several security vulnerabilities have nonetheless emerged—and must be addressed. Prime Minister Fumio Kishida has directed the Japanese government to formulate a comprehensive policy package by the end of August to bolster the resilience of Japan’s energy system against these vulnerabilities. While the specific contents of this package remain unclear, I’d like to share the measures expected to be included—and also highlight some unresolved issues that may not yet be part of the official plan. 3. Naphtha remains the greatest concern—and decisive action is urgently needed. Before the Iran crisis, naphtha—a key bridge between crude oil and petrochemical products—was known only to a narrow circle of industry insiders and remained largely unknown to the general public. Today, however, naphtha has entered everyday vocabulary. Concerns over its supply stability have already disrupted supply chains for numerous manufactured goods. Early in the crisis, Japan sourced 40% of its naphtha consumption from the Middle East—yet possessed no dedicated reserve system for it. Japan’s leading bathroom-system supplier temporarily suspended new order intake due to shortages of naphtha-derived chemicals—delaying construction timelines for numerous homes. Multiple manufacturers and contractors complained of solvent shortages, essential for applying paints and coatings across countless products and construction sites. Most strikingly, Japan’s top-selling potato chip brand switched from colorful packaging to monochrome black-and-white designs—officially citing concerns over paint supply shortages. Intensive efforts by both the Japanese government and industry to secure naphtha imports and downstream chemical products have alleviated these disruptions—but awareness of naphtha’s fragility has become so acute that naphtha-related measures will inevitably form part of the upcoming policy package. A naphtha reserve system existed until 1993, but was abolished under pressure from the chemical industry, which viewed it as a burden on international competitiveness—and at the time, naphtha was excluded from Japan’s formal energy security framework. It must now be reintegrated into that framework, and a naphtha reserve system is highly likely to be reinstated. 4. Diversification of crude oil imports is necessary—but requires concrete policy interventions. Japan’s dependence on Middle Eastern crude stands at a dangerously high 94%. While this figure had slightly improved in recent years, Russia’s invasion of Ukraine caused Japan’s reliance on Middle Eastern crude to rise once again.

Japan Urges Oil Stockpiling and Infrastructure Development as Middle East Risks Rise

17 hours ago

Japanese Trade Minister Ryosei Akazawa urged enhanced oil stockpiling and infrastructure cooperation in Asia during the International Energy Forum to mitigate supply disruption risks from Middle East tensions.

bloomberg

2026-10-11

Japan Urges Oil Stockpiling and Infrastructure Development as Middle East Risks Rise

Japan Urges Oil Stockpiling and Infrastructure Development as Middle East Risks Rise

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