The shockwaves from the blockade of the Strait of Hormuz have rapidly spread to global markets, especially affecting Japan, a country highly dependent on Middle Eastern energy. Its economy and financial markets are facing unprecedented pressure. The Japanese government has issued warnings for Japanese ships to avoid entering the Persian Gulf and instructed those already in the Gulf to seek safe anchorage. This move reflects the fragility of the global energy transport chain and the potential profound impact on Japan's economy.
Stock Market Plummets, Investor Confidence Shaken
One direct reaction to the blockade of the Strait was the sharp downturn of the Tokyo stock market. On March 3, major indices of the Tokyo Stock Exchange fell by more than 3%, marking the largest single-day drop since early 2026. All 33 industry sectors on the exchange declined, with bank and airline stocks particularly weak. Citigroup swiftly downgraded the rating of Japanese stocks, indicating that rising oil prices typically negatively impact the Japanese stock market.
Japan's Economic Vulnerability Exposed, Oil Price Surge a Major Threat
According to Wu Yingjie, a researcher at the University of International Business and Economics' Japan Research Center, the blockade of the Strait of Hormuz poses a long-term challenge to Japan's economy. Approximately 90% of Japan's crude oil imports depend on the Middle East, with the Strait of Hormuz being a critical global oil transport passage. If the passage remains blocked for an extended period, the surge in oil prices will have a profound impact on Japan's economy, with WTI crude prices potentially rising to $140 per barrel, leading to an increase of more than 1% in Japanese oil prices. More severely, if the situation continues to deteriorate, Japan's GDP could decline by up to 0.65%, potentially leading to an economic recession.
Calculations by Nomura Research Institute economist Kiuchi Takehide suggest that for every $10 increase in oil prices, Japan's crude oil import costs will rise by approximately 1.3 trillion yen. The broader impact could extend to the agriculture, fisheries, and food sectors, further elevating living costs and dampening consumer confidence in Japan.
Financial Market Turbulence, Bank and Airline Stocks Plummet
Additionally, Japan's financial market has been affected, with bank stocks showing significant declines. On the 2nd, the Japanese bank sector index fell by 6.3%, marking the largest single-day drop since last April. Naoki Fujiwara, senior fund manager at Shinkin Asset Management, believes that investors may turn to safe-haven assets, leading to a decline in Japanese long-term government bond yields, further exacerbating pressure on bank stocks.
Airline stocks also did not escape the downturn. On the 3rd, Japanese airline stocks fell by over 7%, with ANA falling more than 3.5%. Analysts point out that the dual pressure of escalating war situations and rising oil prices will suppress demand in the aviation industry, consequently affecting airline profitability.
Yen Depreciation Intensifies Import Pressure, Living Costs Rise
The sharp fluctuations in the yen's exchange rate have added further uncertainty to the Japanese economy. On the 3rd, the yen briefly dropped to 157 against the dollar, the first time reaching this level since early February, further increasing import costs. Against this backdrop of economic pressure, the Japanese government is still advancing the expansion of its defense capabilities. On the 3rd, Prime Minister Sanae Takaichi stated that they will expedite strengthening defense capabilities. Defense Minister Shinjiro Koizumi also mentioned plans to establish a "system to deter aggression." However, analysts are concerned that redirecting fiscal resources to defense may further squeeze investment in public welfare and economic sectors, hindering economic recovery.
