Japan’s Takaichi Assures on Naphtha Supply Amid Firms’ Concerns

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(Bloomberg) — Japanese Prime Minister Sanae Takaichi said there will be enough supply of naphtha to meet domestic demand until next year, even as companies raise concerns about supply chain instability following the effective closure of the Strait of Hormuz. 

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“Naphtha imports from areas outside the Middle East, such as the US, Algeria, and Peru, will increase threefold by May, compared with levels before the Middle East conflict,” Takaichi posted on social media on Thursday. She said there have been disruptions in the supply chain due to overbuying of petroleum products by some firms.

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The comments come as signs of the impact from the Middle East conflict begin to show across Japan’s economy. Japan has relied on the Middle East for about 90% of its oil. The disruption in oil supply is testing Takaichi’s leadership and diplomacy, as the government seeks to soften the economic blow from the war in Iran.

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In early April, Takaichi said there was enough naphtha to last Japan over half a year. The assurances of incoming imports and supply lasting until next year suggest an increase in supply, but companies appear wary they may run short of the distilled product, which is used to make everything from tires and clothes to plastic bags and foam packaging.

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Supply chain disruptions stemming from the conflict in Iran are beginning to create choke points across Japan’s auto industry, including the network of companies surrounding Toyota Motor Corp. Some smaller suppliers have said they’ll be unable to deliver some parts starting in two weeks, a Toyota executive told reporters on Tuesday. 

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The National General Contractors Association of Japan, an organization representing building contractors across the nation, warned in a statement Thursday of logistical bottlenecks due to the unstable supply of naphtha-derived products. 

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“There are delays and disruptions in the delivery of building materials, and we are coming to a point where we can’t avoid having to delay or cancel construction” projects, the statement read.

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Takaichi noted on social media that she was aware of supply concerns from the plastic packaging industry, adding that the government will continue to do what it can to ensure there is no disruption to the distribution of food products. 

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In a phone call with Iranian President Masoud Pezeshkian on Thursday that lasted about 20 minutes, Takaichi pressed Iran to ensure the safe passage of vessels through the Strait of Hormuz, according to a statement from Japan’s Foreign Ministry. 

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The call came after a Japan-affiliated vessel was allowed passage through the strait on Wednesday. Takaichi expressed strong hopes that Iran and the US would resume talks to reach a final agreement, and the two leaders agreed to continue communicating, according go the statement. 

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As Japan heads into a long weekend, Takaichi and other members of her government will travel abroad in what will also likely be a push to shore up supply chains and strengthen energy security. 

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Takaichi is set to visit Vietnam and Australia, while Foreign Minister Toshimitsu Motegi is touring Africa. Former Prime Minister Fumio Kishida spoke with Philippine President Ferdinand Marcos Jr. on Thursday, pledging further cooperation on energy security and decarbonization.

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—With assistance from Tsuyoshi Inajima.

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