Japan Grapples with Naphtha Shortage Fears Amid Middle East Conflict

Japan’s government is working to mitigate the economic impact of the Middle East war as oil shortages drive rising inflation, a crisis that threatens to undermine Prime Minister Sanae Takaichi’s commanding lead in opinion polls.

Amid the turmoil, new polling indicates a surge in public concern over shortages of naphtha, a crude oil derivative used in a wide range of products.

The anxiety over a product few had heard of months ago raises questions about supply chain vulnerabilities.

Naphtha commonly refers to highly flammable liquid mixtures derived from petroleum and other sources. It is used in gasoline production and to manufacture plastics, insulation foam, adhesives, medical supplies such as syringes, and printing ink solvents.

Naphtha is used globally, but Asia is particularly vulnerable to current disruptions because it is the largest market for Middle Eastern naphtha exports.

Pronounced “nafusa” in Japanese, the term recently began appearing in news reports about the impact of the Strait of Hormuz blockade on supply chains.

The seriousness of the geopolitical fallout became tangible on May 12 when Calbee, Japan’s largest snack maker, announced that the colorful packaging of its flagship potato chips would go monochrome. Data show Japan’s wholesale inflation accelerated in April at the fastest pace in three years, with naphtha prices surging 79.4%.

While Japan holds significant national stockpiles of gasoline, there are suggestions the government is downplaying disruption risks to other industries. Japanese television networks and newspapers have been running segments explaining what naphtha is and how shortages could affect daily life.

A Kyodo News poll over the weekend found more than 70% of respondents expressed concern about disruptions to naphtha supplies.

Japan sources more than 90% of its oil from the Middle East, making it highly sensitive to current supply problems.

After Calbee’s announcement, the government’s Deputy Chief Cabinet Secretary was forced to reassure the public that adequate naphtha supplies for ink had been secured, following media questions.

Prime Minister Takaichi has made multiple statements insisting Japan is finding alternative oil sources and has resisted calls to reduce consumption that some of Japan’s Asian neighbors have been forced to issue.

However, the naphtha shortage is already reported to be affecting plastic production, prompting Environment Minister Hirotaka Ishihara on Friday to echo earlier assurances on ink supplies: “We have secured the necessary supply of garbage bags. Please remain calm and avoid panic buying.”

Japanese media have also reported that, contrary to government claims, supply chain disruptions are already being felt in sectors including construction, dry cleaning, food processing and paint production.

The cabinet’s approval rating fell 2.5 percentage points to 61.3% in the Kyodo News poll released Sunday. However, this decline comes from very high numbers during the honeymoon period after Takaichi’s landslide election victory in February. It remains unclear how much the Middle East crisis is affecting public opinion and how much responsibility the public believes Takaichi bears.

More than 70% of those surveyed said the government should ask the public to conserve energy.