Japan's Energy Lifeline Hangs on the Strait of Hormuz, Strategic Reserves Build a Buffer Defense

⑴ Japan's energy supply is highly dependent on the Middle East, with approximately 95% of oil imports and 11% of liquefied natural gas (LNG) imports coming from the region. About 70% of oil and 6% of LNG must be transported through the Strait of Hormuz, which has effectively been closed due to the Iran war. ⑵ In terms of oil, Japan imported an average of 2.8 million barrels of crude oil per day in January, mainly from Saudi Arabia, UAE, Kuwait, and Qatar. To address supply risks, Japan holds emergency oil reserves equivalent to 254 days of consumption, including 146 days of national reserves, 101 days of private reserves, and 7 days of joint reserves with oil-producing countries. ⑶ The Okinawa oil storage mechanism forms a unique defensive line, with Saudi Aramco renting 13 storage tanks locally, storing about 8.2 million barrels of crude oil, equivalent to roughly three days of Japan's consumption. As an exchange for providing free storage tanks, Japan has priority access in emergencies. Officials stated this week that there are currently no plans to release reserves; the last release was after the Russia-Ukraine conflict in 2022. ⑷ Regarding liquefied natural gas, Japan's main supply comes from Australia, accounting for about 40%, while imports from the Middle East only account for 11%. As of March 1, major power companies' LNG inventories increased to 2.19 million tons, equivalent to 12 days of consumption. According to Kpler data, if the Strait of Hormuz is interrupted, current inventories can cover 44 weeks of consumption; if all imports are interrupted, it would only last three weeks. ⑸ In terms of response mechanisms, Japan trades about 40 million tons of LNG annually, and some can be redirected domestically in emergencies. It has signed emergency supply agreements with Qatar and is negotiating similar arrangements, including cargo swaps, with Italy and South Korea. The largest LNG buyer, JERA, acts as a government agent and ensures at least one shipment of about 70,000 tons of LNG per month to hedge supply risks.