The world’s third largest strategic crude oil reserve! Is Japan about to "release oil"?

The ongoing Iran crisis continues to impact global energy supplies, with Japan standing on the brink of utilizing its strategic oil reserves.

According to Reuters, Japanese opposition legislator Akira Nagatsuma stated on Sunday that the government has instructed the national oil reserve base in Shibushi City, Kagoshima Prefecture to prepare for the release of crude oil. This is the clearest official signal so far regarding the possibility of tapping reserves.

Bloomberg energy and commodities columnist Javier Blas immediately posted on X, warning that Japan may take action within the next 24 hours, potentially bypassing the US and the International Energy Agency (IEA) and acting independently.

Japan is the world’s third largest holder of strategic oil reserves, behind China and the United States. If Japan taps its reserves this time, it will be the first time since the Russia-Ukraine conflict in 2022, and the first time it considers releasing reserves independently without relying on the IEA coordination mechanism.

Strait of Hormuz effectively closed, Japan’s supply chain in crisis

The immediate trigger for this discussion on tapping reserves is the disruption of Middle Eastern oil supplies caused by the Iran crisis.

According to Reuters, about 95% of Japan’s crude oil imports come from the Middle East, with about 70% transported via the Strait of Hormuz. After the US and Israel attacked Iran, the Strait of Hormuz has been effectively closed, putting immense pressure on Japan’s crude oil supply chain.

Against this backdrop, the Agency for Natural Resources and Energy (ANRE), under Japan’s Ministry of Economy, Trade and Industry, issued a combat readiness order to the Shibushi national oil reserve base last Friday. Officials from JOGMEC (Japan Organization for Metals and Energy Security), which manages the base, confirmed this situation to Nagatsuma. However, Nagatsuma said details such as the specific timing of the release remain unclear, and it is unknown if other reserve bases have received similar instructions.

Minister of Economy, Trade and Industry Ryosei Akazawa said earlier last week that there is currently no specific plan to release oil reserves but will closely monitor the crude oil supply situation and maintain coordination with the IEA. Nevertheless, Kyodo News reported on Friday that the Japanese government is considering tapping part of its national oil reserves, possibly coordinating with other countries—or even acting alone.

Reserve size: Massive on paper, but a supply line cut changes everything

Japan's strategic oil reserves are globally significant, but their actual buffer capacity is being questioned by the market.

According to official data cited by Javier Blas, the Japanese government holds about 260 million barrels of oil reserves, distributed across 10 storage facilities, including aboveground tanks, underground tanks, floating tanks, and cavern storages. Additionally, Japan requires private sector companies to hold oil inventories and has joint oil storage agreements with Saudi Arabia, UAE, and Kuwait, contributing an extra 178 million barrels.

Combined government reserves, private inventories, and joint reserves, Japan’s total oil reserves amount to about 440 million barrels, equivalent to roughly 204 days of imports, nearly matching the US strategic oil reserves (around 415 million barrels).

However, commentators point out that the real significance of this figure needs to be reassessed—when 95% of oil supplies pass through the Strait of Hormuz, once the supply line is cut off, those 204 days of reserves become not a buffer, but a hard countdown.

Independent action: Japan may bypass the IEA and release reserves alone

The most market-watched signal in this discussion over tapping reserves is that Japan may choose to act independently, without relying on the IEA coordination mechanism.

Javier Blas pointed out clearly on X, "The real story to watch is Tokyo acting alone, without US coordination." This stands in sharp contrast to Japan’s previous practice—the last time Japan released oil reserves was in 2022, as part of a coordinated IEA action in response to the energy market shock caused by the Russia-Ukraine conflict.

If Japan chooses unilateral action this time, it would mark a significant shift in its postwar energy policy, sending a signal to the market about Japan’s independent assessment of the current supply crisis’s severity.

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