Japan's oil imports from the Middle East have plunged 67% since the Strait of Hormuz blockade began.
The country is now buying Russian crude for the first time since the war started.
Roughly 90% of Japan's crude comes from the Middle East, with the vast majority transiting Hormuz. A naphtha shortage has disrupted plastics, packaging, and construction, with imports down 47% in April.
Japan has already drawn down its strategic petroleum reserves at record pace, releasing roughly 80 million barrels in March alone, with additional releases in May.
As @Peruvian Bull laid out in a recent episode, Japan's fiscal position was already fragile before this. Public debt exceeds 200% of GDP. The 10-year JGB is at multi-decade highs. The BOJ is running out of room between yield curve pressure and the need to taper.
Japan has been papering over structural problems with monetary intervention for decades rather than letting the system restructure.
Now layer an energy crisis on top. If the Strait stays closed much longer, Japan faces surging energy costs, inflation, manufacturing disruptions, and mounting fiscal strain, all hitting a system that was already stretched thin.
It is scrambling to reroute through US crude, Russia, and alternative suppliers, but at significantly higher cost.
This is the kind of cascading fragility that makes sovereign, permissionless money matter.
When your currency is being debased, your fiscal position is deteriorating, and your energy supply depends on a chokepoint on the other side of the world, the ability to hold and move value without permission is not a luxury.
The country is now buying Russian crude for the first time since the war started.
Roughly 90% of Japan's crude comes from the Middle East, with the vast majority transiting Hormuz. A naphtha shortage has disrupted plastics, packaging, and construction, with imports down 47% in April.
Japan has already drawn down its strategic petroleum reserves at record pace, releasing roughly 80 million barrels in March alone, with additional releases in May.
As @Peruvian Bull laid out in a recent episode, Japan's fiscal position was already fragile before this. Public debt exceeds 200% of GDP. The 10-year JGB is at multi-decade highs. The BOJ is running out of room between yield curve pressure and the need to taper.
Japan has been papering over structural problems with monetary intervention for decades rather than letting the system restructure.
Now layer an energy crisis on top. If the Strait stays closed much longer, Japan faces surging energy costs, inflation, manufacturing disruptions, and mounting fiscal strain, all hitting a system that was already stretched thin.
It is scrambling to reroute through US crude, Russia, and alternative suppliers, but at significantly higher cost.
This is the kind of cascading fragility that makes sovereign, permissionless money matter.
When your currency is being debased, your fiscal position is deteriorating, and your energy supply depends on a chokepoint on the other side of the world, the ability to hold and move value without permission is not a luxury.
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