As Japan is contending with a weakening currency, a heatwave, and dealing with the fallout from the Ukraine war on the global stage, it is also facing an energy crisis.
Japan has always been heavily reliant on massive amounts of imported energy, using foreign oil and gas for approximately 90% of its energy needs.
But as the world’s financial environments almost universally turn toward tighter monetary policies in an effort to combat rising inflation produced by higher energy costs and supply chain issues, Japan has tended toward looser monetary policy, allowing its currency to inflate and devalue relative to other currencies.
Now, as the yen is falling to the lowest level in 20 years, just as crude is rising to its highest dollar-denominated values in history, Japan’s energy bills are skyrocketing.
Jane Nakano, senior fellow at the Center for Strategic & International Studies notes, “A confluence of factors, including the higher fuel prices since the war and the tumbling currency, is putting a significant pressure on Japan’s energy security, making this one of the most serious energy crises Japan has had.”
The situation has become so dire, that despite Japan’s oral commitment to sanctions against Moscow over the invasion of Ukraine, Japan has been forced to continue importing Russian oil and gas, even as the rest of the western alliance has held steady.
Takeshi Hashimoto, the head of Mitsui OSK Lines, one of the biggest shippers in Asia, noted Japan has to keep importing Russian LNG, as its nuclear reactors are still offline due to the Fukushima disaster, and it needs to buy the cheapest LNG on the market due it its energy demands.
Takeshi Hashimoto said, “We cannot use many nuclear power stations therefore the supply and demand balance of the power industry is quite tight. Nowadays, the spot market of both LNG and coal is quite expensive. That is one of the reasons why Japan is so reluctant to stop the LNG imports from Russia.”
As all this is going on, Japan was the nation which proposed to the G7 capping the price of Russian exported oil and gas at half the current rates, as part of an enhanced sanctions program. Clearly such a sanctions program would benefit the nation, and raises the question of whether Japan may be on the cusp of a crisis leading them to propose desperate measures.
Unfortunately for Japan, world leaders are still trying to figure out a way to implement such a regime, with little progress.
