🇯🇵🇺🇸 Land of the Setting Sun: Japan clings to US puppet status despite energy crunch triggered by Iran war
With 90% of Japan’s oil and 11% of its LNG sourced in the Persian Gulf, effectively closed thanks to the US-Israeli war on Iran, Tokyo has been put in a strategic bind, facing growing pressure both domestically and in ties with neighbors.
🟠 Tokyo has contributed 80M barrels of oil to the G7-led 400M barrel phased reserves release, but signaled it will only sell it to domestic refiners, rejecting pleas for help from Vietnam and the Philippines, per Bloomberg
🟠 domestically, the government has been forced to lift restrictions on coal-fired power plants, introduce subsidies to keep gasoline at ~$4 a gallon, and raise household electricity bills by ~$95 starting in April. Over time, logistical, flights, and everything else linked to hydrocarbon energy will face price hikes
🟠 80M barrels is enough for ~45 days. If Hormuz remains blocked after then, Japan will have only two options, neither of them good:
⚫️ engage in a cutthroat energy bid price war, which will raise domestic prices and worsen ties with other energy-dependent neighbors in Asia
⚫️ introduce fuel rationing, which could trigger a recession or even a debt crisis (Japan already has a debt-to-GDP ratio of ~240%, the highest among rich nations)
Notwithstanding these pressures, Japan:
✅ continues to buy US Treasuries ($1.2T and counting)
✅ lets 50k+ US troops be stationed on its territory, 80 years after the end of WWII, for ‘defense’ (although the Iran war has seen US pulling out assets and repositioning them in Israel)
✅ keeps sanctions on Iranian oil, one of the only sources of Gulf oil currently making its way past Hormuz
✅ has pledged $73B to US energy security projects, including small modular reactors and natural gas infrastructure in Tennessee, Alabama, Pennsylvania and Texas
✅ swallows US tariffs and accepts an export-crushing strong yen policy to satisfy Washington
✅ sidelines its own foreign policy interests, including ties with powers like China and ASEAN
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