Oil price increases raise concern about Japan’s economy
This handout photo released by Iran’s Revolutionary Guard Corps (IRGC) official Sepah News Telegram channel on June 13, 2025 shows smoke billowing from a site reportedly targeted by an Israeli strike in the Iranian capital Tehran early in the morning. Separate US military strikes on Iranian nuclear facilities caused oil prices to gyrate. (Photo by SEPAH NEWS/AFP)
Tokyo, Japan –Rising oil prices following last weekend’s US military strikes on Iranian nuclear facilities have raised concern about possible negative effects on Japan’s economy.
Companies and market participants are worried that crude oil prices may shot up further if Iran retaliates by closing the Strait of Hormuz, a vital global oil transportation route, causing a slump in Japanese gross domestic product.
On the Tokyo Commodity Exchange on Monday, the key Dubai crude oil futures contract for November settlement rose 2.8 pct from Friday to 66,080 yen per kiloliter. It briefly reached 66,390 yen, the highest level for a key contract since early April.
READ: Investors brace for spike in oil prices after US bombs Iran sites
Japan relies on the Middle East for more than 90 pct of its oil imports, much of which pass through the Strait of Hormuz.
Takahide Kiuchi, executive economist at Nomura Research Institute Ltd., stated that if international oil prices rise to 120 dollars per barrel due to such a blockade, Japan’s inflation-adjusted real GDP could be pushed down by 0.6 pct.
“Downward risks exceeding (U.S. President Donald) Trump’s tariffs will be added to the Japanese economy,” Kiuchi said.
In response to the tense Middle East situation, the government has decided to introduce an additional subsidy to prepare for a potential jump in gasoline prices.
Under a measure set to run from Thursday until the end of August, if the national average price of gasoline exceeds 175 yen per liter, the excess amount will be fully covered.
Businesses are also on alert.
“There is no problem with supplies at present, but we are calling on shipping companies to take sufficient safety measures for operations in the Persian Gulf waters,” said an official of oil distributor Cosmo Energy Holdings Co.
Nippon Yusen K.K., which operates crude oil tankers, has not suspended its services in the Strait of Hormuz but will closely monitor the situation. “We will make a decision while assessing the latest safety situation,” an official said.
