Largest Release in History! Japan to Release Oil Reserves Starting Thursday, First Tanker Circumnavigating Route Set to Arrive in Japan

As the Iran conflict continues to impact shipping through the Strait of Hormuz, Japanese Prime Minister Sanae Takaichi announced the largest strategic oil reserve release in history and ordered a comprehensive review of the oil supply chain to stabilize domestic energy supplies and prices.

On March 24, The Guardian reported that Prime Minister Takaichi announced that Japan will begin utilizing its national strategic reserves this Thursday (March 26), with a release volume of approximately 80 million barrels, equivalent to 45 days of domestic demand, 1.8 times the amount released after the 2011 Fukushima nuclear disaster.

The report states that the large scale and rapid pace of this reserve release reflect Japan’s high alertness regarding energy security.

Rising oil prices have increased inflation pressures, complicating the Bank of Japan’s gradual interest rate normalization path; meanwhile, the yen’s continued weakness has further driven up import costs. Japanese Finance Ministry officials have inquired about speculative activities in the crude oil futures market, raising expectations of market intervention.

Additionally, according to Bloomberg, Trade Minister Ryosei Akazawa stated on Tuesday (March 24) that the first Japanese oil tanker rerouted via an alternative route is expected to arrive in Japan on March 28.

Record-breaking Reserve Release Volume

The total amount of oil reserves released by Japan this time is about 80 million barrels, equivalent to 45 days of domestic consumption.

Last week, Prime Minister Takaichi’s government approved the release of 15 days’ worth of private sector reserves. According to Bloomberg, private reserves have been released since March 16, with the national reserve release officially starting on March 26.

As a reference, Japan held about 470 million barrels of oil reserves at the end of last year, enough for 254 days of domestic consumption. The current release is 1.8 times the amount released after the 2011 Great East Japan Earthquake and tsunami that severely damaged the Fukushima Daiichi Nuclear Power Plant, leading to the temporary shutdown of all nuclear reactors in Japan, setting a new record for single-instance reserve releases in Japan’s history.

Japan is an economy with extreme resource scarcity, relying on Middle Eastern imports for over 90% of its crude oil, most of which is transported through the Strait of Hormuz. Since the outbreak of the Iran conflict on February 28, this critical waterway has effectively been paralyzed, putting enormous pressure on Japan’s energy supply chain.

Comprehensive Supply Chain Review; First Rerouted Oil Tanker Arrives This Week

According to reports, Prime Minister Takaichi convened a meeting with relevant cabinet officials on Tuesday morning, attended by Foreign Minister Toshimitsu Motegi and Defense Minister Shinjiro Koizumi.

During the meeting, Takaichi assigned the task of a comprehensive review of the oil-related supply chain to Ryosei Akazawa.

Akazawa’s review scope not only covers energy-related oil products but also extends to non-energy derivatives such as naphtha—an essential raw material for plastics, whose supply stability directly affects Japan’s manufacturing operations.

In terms of shipping, Akazawa stated on Tuesday that the first Japanese oil tanker rerouted via an alternative route is expected to arrive in Japan on March 28.

Bloomberg’s vessel tracking data shows that the supertanker “Omega Trader,” managed by Mitsui O.S.K. Lines Ltd., has passed through the Strait of Hormuz, but Mitsui O.S.K. denies that the vessel has completed the aforementioned voyage.

Inflation and Exchange Rate Dual Pressures; Central Bank Policy Normalization Hindered

It is reported that the surge in oil prices following the conflict is expected to intensify Japan’s inflation pressures, making the Bank of Japan’s gradual rate hike strategy more complicated.

According to Wall Street Journal, Japan’s core inflation in February fell to 1.6%, the first time in nearly four years that it dropped below the BOJ’s 2% target, but economists expect prices to accelerate again starting in March.

Meanwhile, the yen’s continued weakness will further increase Japan’s oil import costs.

Finance Ministry officials have issued warnings about suspected speculative activities affecting the exchange rate in the crude oil futures market, and authorities are reportedly inquiring market participants about potential interventions in the crude oil futures market.

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