Japan is facing an unexpected economic crisis caused by Middle East tensions that are disrupting the world’s energy supply routes. The Strait of Hormuz, a vital oil shipping chokepoint, has become even more uncertain and the fear of a supply chain disruption spreads far beyond crude oil, to a lesser-known, but extremely vital, material:Â naphtha.
What we know about Naphtha? It is a flammable liquid processed from crude oil and natural gas processing, and a key raw material in the petrochemical industry. When cracked, it produces all the polymers that make up our lives: plastics, synthetic fibres, adhesives, insulation, solvents, printing inks and even medical supplies like syringes.
Why does Japan depend so heavily on naphtha imports?
Japan imports more than 90% of its crude oil from the Middle East, meaning it is heavily dependent on the stability of that region. With steady shipping routes through the Strait of Hormuz under threat, fears rose that both crude oil and refined petrochemical products like naphtha would be impacted and shortages might ensue. You could say this turned a global conflict into a domestic supply-chain crisis.
The crisis became visible and central when major snack maker Calbee announced a temporary monochrome switch when packaging and industrial materials were in short supply.Â
For a short period, ever since, the general public were anxious about product shortages, be it the garbage bags to keep themselves clean, packaging materials for their products, or household goods that used naphtha-based plastics.
Which Industries Are Being Affected?
The impact is spreading across areas like manufacturing, food processing, construction and healthcare. Things like plastic, coated paper, insulation materials and medical supplies such as gloves and syringes are facing supply pressure.
Some food companies have already changed how they package their products while others have stopped making products because they cannot get the materials they need.
Is Inflation Rising Because of Crisis?
Yes. The price of naphtha is going up. That is making it more expensive to make things. In Japan the cost of things that businesses buy has increased a lot and naphtha prices are going up fast. This means that manufacturers have to pay more and that will affect how much people pay for things.
Authorities say that they have essential supplies and that people do not need to worry. However they are thinking about taking emergency measures like watching supplies and maybe conserving some things because some industries are having problems.
Many garbage bags in Japan are made from a type of plastic that comes from naphtha. When people got worried that there might not be enough they started buying more. That caused shipments to go up. Some areas even changed the rules about what kinds of bags people can use for garbage so that people would not panic.
A Bigger Economic Risk for Japan
This crisis is not about shortages now. It could affect how much Japan makes, how well it can sell things to countries and how much prices go up.
It also makes it harder for people in charge to balance keeping energy flowing with keeping the economy stable in a country that imports a lot. This crisis shows how conflicts can cause problems with the economy.
What started as a problem with energy in the Middle East has turned into a hidden problem with supplies, in Japan caused by a lack of naphtha and made worse by people buying much.
