Special Report
TradeTrend
Published: Oct 4, 2026
TOKYO, October 4, 2026: Prime Minister Takaichi’s statement on Japan’s energy supplies forces a strategic reckoning: as the Middle East energy disruption compels major Asian manufacturing economies to reconsider how they secure energy, will the world face a new trade-off between the cost of manufactured goods, industrial competitiveness and the carbon footprint of global supply chains?
Prime Minister Takaichi’s warning over Japan’s energy position comes as the government continues to rely on alternative procurement and inventories to maintain supplies after the disruption to Middle Eastern energy routes. Tokyo says alternative sourcing has restored naphtha supplies to more than 80% of their previous level, while crude procurement is being diversified beyond the Middle East.
中東情勢が不安定化する中、政府の目詰まり解消への取組の最新状況をお伝えします。 原油については、調達先の多角化が進展しています。 10月は、スエズ運河経由のタンカーが到着する目途が立っており、前年平月比で約10割の調達が実現できる見通しです。 このため、10月も国家備蓄放出の決定を行わないこととします。（資料1） 今後も代替調達を進め、備蓄の放出を抑えながら、「日本全体として必要となる量」を確保していきます。 ナフサについても、国内での精製、代替調達、川中の製品調達が安定的に継続しており、川中在庫は平時の水準（2か月分）に回復しました。 ナフサ由来の化学製品の供給も安定的に推移しています。 燃料油や化学製品の目詰まりの相談は劇的に減少しており、供給要請を頂いた案件は、最近要請頂いた案件を除き、対応を完了しました。 追加のご相談や要請を頂きましたら、速やかに対応してまいります。（資料2） 塗料・シンナーについては、6月に工務店をはじめとする最終需要家の皆様へのシンナー直接販売スキームを立ち上げましたが、この2か月間、追加の申し込みはありません。 一人親方などからの「建設・住宅資材」の供給要請、自動車整備工場などからの「エンジンオイル」の供給要請についても、対応を完了しました。（資料3、資料4） 国民の皆様の命に直結する医療分野においては、目詰まりが確認できた「115品目」の全てについて、目詰まりを解消しました。 「医療用手袋」、「分包紙」、「薬剤容器」については、追加の相談を頂いた場合には、速やかにお届けできるようにしています。（資料5） 包装資材や農業資材の不足にお悩みの「パン・菓子等販売店」や「園芸農家」についても、プッシュ型調査を進めた結果、把握した全ての目詰まりへの対応が完了しました。（資料6） 引き続き、中東情勢の変化を注視しつつ、目詰まりなど国民の皆様の命や暮らしを支える分野でのお困りごとを、一件一件、着実に解消していきます。 高市内閣は、「代替調達の促進」と「目詰まり」の解消を進め、国民の皆様の命と暮らし、そして経済活動に支障が生じないよう全力で取り組みます。
— 高市早苗 (@takaichi_sanae) October 4, 2026
But the disruption has not been confined to the availability of energy itself. Japan’s manufacturers and other businesses have been dealing with higher fuel and petrochemical prices, supply bottlenecks and increased procurement costs, while China, South Korea and Taiwan face their own exposure to Middle Eastern oil, LNG and industrial feedstocks. The Bank for International Settlements (BIS) records that more than 80% of crude oil and natural gas transiting the Strait of Hormuz was destined for Asia before the conflict, with petrochemical plants in Japan, South Korea and Chinese Taipei facing curtailments as naphtha and LNG constraints reached manufacturing.
The four economies have responded differently to the disruption. Japan has expanded alternative crude procurement and maintained inventories; China has drawn on domestic production, inventories and alternative imports; South Korea has released strategic oil stocks and supported additional naphtha procurement; and Taiwan has diversified supplies while maintaining oil, gas and coal inventories above statutory safety levels. Manufacturers’ associations and business groups have also reported higher procurement, fuel and petrochemical costs as companies adjust to the changed supply conditions.
What Changed in Energy Supply
The four manufacturing economies have responded through different combinations of alternative procurement, inventories, domestic production and fuel substitution. Japan has expanded crude sourcing beyond the Middle East and says national supplies are being maintained, but the Ministry of Economy, Trade and Industry (METI) notes that much of its traditional Saudi Arabian and UAE crude was secured through term contracts, whereas replacement supplies are being procured largely on the spot market. METI has also reported supply imbalances and distribution bottlenecks even as overall volumes are being secured.
China has reduced crude and liquefied natural gas (LNG) purchases as higher prices encouraged fuel switching and greater use of domestic production. South Korea has released additional crude and supported alternative naphtha supplies, while Taiwan has diversified procurement and maintained oil, gas and coal inventories above statutory safety levels.
The change is also visible in the manufacturing sector. The Japan Chamber of Commerce and Industry (JCCI), surveying 2,497 companies through chambers across all 47 prefectures, found higher procurement costs reported by 74.8% of respondents and higher fuel costs by 62.9%.
The Bank for International Settlements (BIS) records that the disruption extended beyond crude and gas into petrochemicals and other industrial inputs, with petrochemical plants in Japan, South Korea and Chinese Taipei facing curtailments as naphtha and LNG constraints reached manufacturing.
Regional Energy Supply Response Strategies
Policy and supply countermeasures following Middle East energy disruptions
| Economy | Primary Supply Action & Policy Response |
|---|---|
| 🇯🇵 Japan | Expanded spot crude procurement; restored naphtha supplies to >80% despite distribution bottlenecks. |
| 🇨🇳 China | Reduced LNG imports; expanded domestic production and switched chemical feedstocks to coal. |
| 🇰🇷 South Korea | Released strategic oil reserves; provided KRW 674.4B subsidy covering 50% of naphtha import price gap. |
| 🇹🇼 Taiwan | Diversified import sources while maintaining oil, gas, and coal reserves above statutory safety thresholds. |
How the Cost Is Being Absorbed
The adjustment has taken several forms. The International Energy Agency (IEA) finds that higher LNG prices prompted demand-side measures and fuel switching across Asian markets, while stronger domestic gas production and lower demand helped China reduce LNG imports. In Japan, the Japan Research Institute (JRI) finds that alternative naphtha procurement increased as Middle Eastern supplies fell, but total imports remained below the previous year's level, leaving constraints in some downstream materials.
South Korea has relied more directly on government support. The Ministry of Trade, Industry and Resources (MOTIR) introduced a KRW 674.4 billion programme covering half the difference between pre-conflict and actual naphtha import prices, while also supporting substitute feedstocks and additional freight costs for crude sourced outside the Middle East. The Korea Institute for International Economic Policy (KIEP) found that Korean imports of crude, butane, naphtha and propane became more expensive even as import volumes declined, increasing procurement and operating costs for manufacturers.
Taiwan shows another form of absorption. Research by the Chung-Hua Institution for Economic Research (CIER) found that higher oil, fuel, electricity and transport costs pushed up prices for basic industrial materials, while cautious downstream demand made it difficult for many firms to pass the increase through. The result was a widening difference between the pressure on upstream costs and the ability of downstream manufacturers to recover it.
Cost Mitigation & Upstream Pressure Metrics
Proportional measures and procurement restoration across key hubs
Exposed Sectors and Manufacturing Chains
The clearest transmission channel runs through petrochemicals. The Japan Petrochemical Industry Association (JPCA) identifies naphtha as the principal raw material for Japan's petrochemical industry, whose products supply plastics, synthetic fibres and synthetic rubber as well as automotive, computer and electrical industries. JPCA's 2026 production statistics also record substantial year-on-year declines in several petrochemical products in March and April. The Korea Chemical Industry Association (KCIA), meanwhile, reported that Korean petrochemical producers were facing naphtha supply disruptions and required continued coordination to secure alternative sources.
The plastics industry provides a direct downstream indication. The Japan Plastics Industry Federation established an information channel in April following a Ministry of Economy, Trade and Industry request on petroleum-related product supply, asking companies to report procurement sources, affected products and future procurement prospects. Plastics Europe separately reported higher energy and raw-material costs and supply problems affecting European plastics producers during the Middle East disruption.
Construction materials show another route from feedstock to downstream manufacturing. The Japan Research Institute (JRI) found that declining Middle Eastern naphtha supplies created constraints in naphtha-derived construction materials in Japan, while alternative procurement had not restored imports to the previous year's level. JRI also identified higher metal, chemical and transport costs as channels through which the oil shock could raise construction costs.
The semiconductor chain is exposed through critical industrial gases as well as energy. The Taiwan Semiconductor Industry Association (TSIA) identified helium and hydrogen as particular concerns following the Middle East disruption, saying member companies were maintaining short-term inventories and seeking alternative supplies. The Center for Strategic and International Studies (CSIS) likewise identified South Korea's exposure to disruptions in helium, naphtha and other inputs used across its semiconductor and petrochemical industries.
Automobiles carry the material and energy effects further downstream. S&P Global identifies polypropylene, nylon, synthetic rubber, polyurethane and other petrochemical-derived materials among the inputs exposed to higher feedstock costs in automobile production. The Korea Automobile & Mobility Association (KAMA) reported that sustained high oil prices during the Middle East conflict were affecting the Korean automobile market, while demand for electric vehicles rose sharply as consumers responded to higher fuel costs.
The battery and clean-energy chain introduces another set of critical materials. The IEA reports that disrupted sulphur supplies and higher prices for aluminium, sulphur and sulphuric acid have increased production costs and supply risks across metals and battery-material chains. The Asia Group similarly identifies sulphur as a critical link in the global clean-energy and electrification supply chain, noting that the Middle East produces almost one-quarter of global sulphur and around half of seaborne sulphur trade passes through the Strait of Hormuz.
Critical Industrial Transmission Channels
Specific feedstock exposures and downstream manufacturing impacts
| Sector | Exposed Inputs | Downstream Impact |
|---|---|---|
| Petrochemicals | Naphtha, LNG, Ethylene | Plant curtailments, synthetic rubber/resin cost spikes |
| Semiconductors | Helium, Hydrogen gas | Short-term inventory buffer reliance, supply pivots |
| Automotive | Polypropylene, Nylon, Rubber | Higher assembly costs, accelerated EV demand shift |
| Clean Energy | Sulphur, Sulphuric Acid, Aluminium | Battery raw material price inflation & supply risks |
The IEA finds that the same energy shock is also changing the economics of fuel choice: higher natural-gas prices have encouraged gas-to-coal switching in China, Korea and Japan, while higher oil prices have improved the economics of coal-based alternatives in China's chemical sector. The IEA expects some of this switching to ease if gas prices fall and LNG flows recover.
Energy Security and Carbon Trade-off
South Korea's response shows how an energy-security shock can move against an established coal phase-out. The country's coal-fired generation had already been declining as nuclear and other sources expanded, but the 2026 energy disruption has increased the economic attraction of coal relative to expensive imported gas. Climate Action Tracker records South Korea's commitment to phase out unabated coal by 2040 and its 2050 carbon-neutrality target, while also noting that the planned pace remains too slow for a 1.5°C-compatible pathway. The organisation warns that replacing coal with LNG could create another form of fossil-fuel dependence rather than completing the transition.
Japan faces a similar tension from a different starting point. The Renewable Energy Institute says the Middle East crisis exposed the country's dependence on imported fossil fuels and argues that emergency measures, including expanded coal-fired generation, are inconsistent with the direction of Japan's Green Transformation (GX) strategy. Its assessment calls for faster investment in renewable energy, energy efficiency and electrification to reduce exposure to imported fossil fuels. Japan's latest emissions target nevertheless calls for a 60% reduction from 2013 levels by 2035 and 73% by 2040, with net zero remaining the longer-term objective.
Statutory Decarbonization Targets vs. Energy Security
Official reduction targets complicated by near-term emergency fuel switching
China's response is less straightforward because clean electricity is expanding while coal remains important in parts of the economy. Ember's 2026 China Energy Transition Review finds that coal generation fell in 2025 even as electricity demand increased 5%, with clean electricity meeting all additional power demand that year. Coal generation has since flattened or declined in 17 of the 26 provincial-level regions examined by Ember, while fossil-fuel use has already peaked in eight of 11 industrial sectors covered by its analysis.
At the same time, the energy-security response has not eliminated China's dependence on coal. Ember records continued coal use in the power system and identifies coal-to-chemicals among the areas where fossil-fuel demand remains difficult to displace.
Taiwan provides a different response to the same disruption. Its energy authorities have focused on maintaining oil, gas and coal inventories, diversifying procurement and securing supplies rather than documenting a comparable shift from gas to coal. Taiwan's National Development Council continues to place those measures within a 2050 net-zero pathway, with emissions-reduction targets for 2030, 2032 and 2035. The four manufacturing economies therefore do not face an identical carbon trade-off even when exposed to the same regional energy disruption.
The international climate framework sets the longer-term direction against which these responses can be measured. The United Nations Framework Convention on Climate Change (UNFCCC) records that the COP28 global stocktake called for accelerated efforts to phase down unabated coal power and transition away from fossil fuels in energy systems. South Korea's coal phase-out commitment, Japan's GX pathway and China's expanding clean-power system all point toward that direction, while the immediate energy response shows how quickly security concerns can complicate the transition.
Will Higher Energy Costs Reach Global Buyers?
The cost of securing energy is already appearing in industrial input prices, but the available data show that the increase is not moving through the production chain at the same rate. China's National Bureau of Statistics reported that industrial producers paid 5.5% more for inputs in July than a year earlier, with fuel and power and raw chemical materials each 9.3% higher and non-ferrous metals and cables 19% higher. Yet producer prices for consumer goods fell 0.8%, while prices for durable consumer goods rose only 0.4%. The gap indicates that higher upstream costs were not being transferred fully into finished consumer products.
Japan's manufacturers provide a more direct view of how that gap is being managed. A survey of 2,497 companies by the Japan Chamber of Commerce and Industry (JCCI) found that 74.8% reported higher procurement costs and 62.9% higher fuel costs following the Middle East disruption. But only 46.6% said they had transferred all or part of the additional costs into their selling prices, while 48.4% said they had transferred little or none. Among responding firms, 39.7% were raising selling prices and 38.9% were building inventories of consumer goods.
Upstream Input Inflation vs. Downstream Consumer Prices
Year-over-Year (%) input price growth vs. finished product pricing
The pressure is also visible before goods reach consumers. The Bank of Japan's July Corporate Goods Price Index shows petroleum and coal products and chemicals among the categories affected by changing input prices, while imported naphtha, crude petroleum and chemical products remained part of the price movement entering Japanese production. The data illustrate how the energy shock can move through intermediate materials even when the final price of manufactured products does not rise at the same pace.
The Asian Development Bank (ADB) finds a similar pattern across the region. Its September outlook says persistently high energy prices continue to put upward pressure on prices, but broad government subsidies have tempered the pass-through to consumers. Its analysis of producer prices notes that higher raw-material and intermediate-input costs can move through downstream producer prices and ultimately into consumer prices, but distribution margins, retail markups and other costs affect how much of the increase reaches buyers.
China provides another indication that weak demand can limit the final transmission. The ADB reports that higher global energy prices pushed up Chinese producer-price inflation, but structural weakness in housing and subdued demand for consumer goods were expected to limit pass-through even while oil prices remained elevated. China's July data show the same divergence: input prices remained substantially higher than a year earlier while consumer-goods producer prices remained negative.
The downstream pressure is nevertheless reaching businesses outside manufacturing. The Japan Chamber of Commerce and Industry's May business survey found that higher prices for petroleum-derived products were affecting wholesale, retail and service businesses through weaker margins, while manufacturing and construction firms reported lower production, delayed deliveries and other operating pressures. By July, the chamber said supply constraints had eased somewhat, but higher procurement prices were still affecting businesses across sectors.
The Asian Development Bank's regional assessment leaves the remaining uncertainty at the consumer end of the chain: energy prices continue to exert upward pressure, but subsidies and weak demand can delay or reduce the amount ultimately paid by buyers.
