Key facts
- Japan will invest in overseas oil pipeline projects to reduce reliance on the Strait of Hormuz.
- Investments will be channeled through Japanese companies using risk-capital funding.
- Middle Eastern crude imports for Japan fell significantly in April.
- Japan's total import bill hit a record in June due to oil prices.
- Alternative oil sources like the US and Russia are being utilized.
Japan is set to invest in overseas oil pipeline projects, particularly in the Middle East, as part of a strategy to reduce its dependence on the Strait of Hormuz for crude oil imports. The investments will be made by Japanese companies through risk-capital funding, according to a document from the country's economy ministry. This initiative follows requests from Saudi Arabia and the UAE for Japan to participate in expanding their oil pipeline networks.
Historically, Japan relied on the Middle East for 95% of its crude imports. However, recent geopolitical events and supply disruptions have forced the nation to seek alternative routes and sources. In April, Japan's energy imports from the Middle East plummeted by 67.2% year-on-year, reaching the lowest volume since data collection began in 1979. This shift has led to increased reliance on imports from countries like the United States and Russia that do not use the Strait of Hormuz.
The disruption has also impacted Japan's import costs. In June, the country's total import bill swelled to a record $89.46 billion, driven by oil prices, despite a 13.7% decrease in import volume compared to the previous year. Prime Minister Sanae Takaichi confirmed in June that current oil imports are arriving via routes bypassing the Strait of Hormuz.