Japan Week Ahead: PM Takaichi Faces Biggest Challenge in Office as Nation Braces for Major Crude Oil Supply Disruption, Return of Higher Energy Costs

–Japan Expected to Tide Over Impact of Temporary Iranian Blockade of Strait of Hormuz Despite Its Heavy Reliance on Middel East Oil, Gas

By Max Sato

(MaceNews) – Here are the key Japanese events for the coming week. Just as parliamentary debate on the fiscal 2026 budget has shifted to the key budget committee of the House of Representatives, where the ruling coalition holds a vast majority, the government is forced to address resumed energy supply concerns.

Prime Minister Sanae Takaichi faces the biggest challenge of her leadership since taking office in October and subsequent election in the Diet this month after leading her conservative Liberal Democratic Party to a landslide win in general elections.

In response to attacks on Tehran by Israeli and U.S. forces, Iran said it was blocking the Strait of Hormuz, threatening to choke off the key shipping route for oil and gas exports from the Middle East to the world.

Japan is expected to manage this spike in geopolitical risks by seeking alternative supply routes and relying on national efforts by households and businesses to conserve energy consumption, as long as the conflict is temporary and does not spread beyond the region, triggering a worldwide supply chain breakdown.

While Japan relies on the Middle East for more than 90% of its crude oil imports and the bulk of the crude comes through the Strait of Hormuz, it could ask Saudi Arabia, its second largest supplier (in 2025 data), to pump more and ship some out of its Yanbu port on the Red Sea. The United Arab Emirates, which is the largest supplier of crude oil to Japan, could re-route some shipments via its Fujairah port in Oman, bypassing the Mideast Gulf. But there will be competition for this route by other major energy consumers, so Tokyo will be vying for lots at a premium price.

Japan holds sufficient crude oil reserves onshore and offshore to cover 254 days of consumption, with 146 days of stockpiles by the government, 101 days by refineries and seven days in joint reserves with oil producers.  

Japan’s main strength for weathering the disruption may be its ability to rouse national solidarity to save energy at all levels, a strategy that was effective during the scheduled blackouts by Tokyo Electric Power Co. (TEPCO) after the Fukushima nuclear power meltdown caused by the earthquake and tsunami in northeastern Japan in March 2011.

All manufacturers, from major breweries to carmakers, cut production, train operators suspended some services, large retail stores and office buildings slashed operating hours and every household tried to minimize power usage. Tokyo and surrounding prefectures served by TEPCO were darker and quieter from early evening onward. The resulting energy savings kept the economy going while all 54 nuclear reactors in the country were shut down after the meltdown. That was significant considering roughly one third of Japan’s power generation was nuclear, with the other two-thirds from hydro and fossil fuels (about 30% each).

Now Japan is more vulnerable to disrupted fossil fuel supply. Thermal power generation (by natural gas, coal and crude oil) now accounts for about 70% of total power generation and the share of nuclear power is only about 10%, with renewable energy including solar and hydro about 20%.

But since the national solidarity campaign of 2011, there has been a marked shift in the general attitude, with people feeling less inclined to unite in emergencies. The late PM Shinzo Abe, during his second premiership from 2012 to 2020, seemed to worsen the division with verbal attacks on certain groups in society. With the impact of social media misinformation, recent national election results have shown many people are easily swayed by populist slogans. But voters in the last election lined up behind Takaichi, showing they were less concerned about ideology and more concerned about who could lead them.

For the coming week, the economic data calendar is light. The jobless rate is expected to remain low and stable at 2.6% in January. Payrolls have continued growing from year-earlier levels for over three years.

The focus is on whether the number of unemployed has risen on year for a sixth straight month. In December 2025, it rose by 120,000 from a year before but the number was at a 10-month low at an unadjusted 1.66 million, down from 1.71 million the previous month. In December 2024, it dipped 20,000 for the fifth straight year-on-year drop to a pre-pandemic level of 1.54 million, which was the lowest since 1.46 million in December 2019 (it was 1.60 million in January 2020).

– Monday, March 2
1030 JST (0130 GMT Monday, March 2/2030 EST Sunday, March 1) Bank of Japan Deputy Governor Ryozo Himino, a former Financial Services Agency commissioner, speaks to business leaders in Wakayama, western Japan.

Himino is expected to repeat the official line that the central bank will continue raising rates if growth and inflation evolve in line with its medium-term outlook, noting that real interest rates are at “significantly low levels.”

At its latest policy meeting on Jan. 22-23, the BOJ’s nine-member board decided in an 8 to 1 vote to leave the target for the overnight interest at 0.75% after conducting its first rate hike in six meetings in December by raising it by 25 basis points (0.25 percentage point) to a 30-year high. The no change in policy was expected as the bank stays the course of lifting the policy rate only gradually toward a more neutral level of at least 1%.

Board member Hajime Takata, formerly with Mizuho Securities, called for a back-to-back rate increase to 1.0%, arguing that the bank’s 2% inflation target has been “largely achieved” and that there are “high upside risks” to domestic inflation as other economies are entering a recovery phase. Takata and his colleague Naoki Tamura, who came from the Sumitomo Mitsui banking group, were advocates for an earlier rate hike before December.

In the December rate hike statement, the bank stressed that real interest rates would remain “significantly negative” and thus that accommodative monetary conditions should continue and support economic activities.

– Monday, March 2
1400 JST (0500 GMT/0000 EST Monday, March 2) BOJ Deputy Governor Himino holds a news conference in Wakayama.

– Tuesday, March 3
0830 JST (2330 GMT/1830 EST Monday, March 2) The Ministry of Internal Affairs and Communications releases the January unemployment rate.
Mace News median: 2.6% (range: 2.5% to 2.6%) vs. 2.6% in the previous five months, over 5-year low of 2.3% in July, 2.5% from March to June

Japanese payrolls are expected to post a 42nd straight year-on-year increase in January as many firms are seeking to secure qualified workers, particularly at hospitals, hotels, restaurants and technical service providers. Manufacturers and the wholesale/retail sector continue shedding their workforces, although both industries are big employers, each holding more than 10 million workers on their payrolls and together accounting for 30% of the total number of employed people.

The seasonally adjusted unemployment rate is forecast to remain stable at 2.6% after being flat in the previous four months, rising to the current level in August and hitting a more than five-year low of 2.3% in July.

The jobless rate averaged 2.5% in 2025 (vs. 2.5% in 2024 and 2.6% in 2023) after moving moved in a tight 2.3% to 2.6% range. The 2.3% rate in July is the lowest since 2.2% recorded in December 2019 in the early phase of the pandemic.

The government continues to describe employment conditions as “showing signs of improvement” in its latest monthly economic report for February, unchanged since the last upgrade in June 2023.

– Tuesday, March 3
0850 JST (2350 GMT/1850 EST Monday, March 2) The Ministry of Finance releases Q4 Financial Statements Statistics of Corporations by Industry, key to calculating revisions to October-December GDP due March 10.

Economists will use demand side business investment figures and inventories in the MOF survey to predict revisions to the Q4 GDP data. The preliminary data released on Feb. 16 showed that Japan’s economic growth in the final quarter of 2025 was nearly flat, up just 0.1% on quarter (0.053% to be more precise), or 0.2% (0.21%) annualized, coming in much weaker than expected as a rebound in business investment turned out to be tepid, public works spending fell more sharply than estimated and stiff U.S. tariffs choked exports of autos, metals and computer chips.

Private consumption, which accounts for about 55% of the GDP, remains sluggish in the face of elevated costs for daily necessities and falling real wages, with its resilience fizzling out toward the end of the year when bad winter weather hampered economic activity. The Q4 growth barely made up for the degree of the economy’s first contraction in six quarters in Q3, when it shrank a downwardly revised 0.7% q/q (2.6% annualized).

Domestic demand made virtually no contribution (+0.04 percentage point) to total domestic output, far below the positive 0.4 point anticipated by economists, while external demand as measured by net exports (exports minus imports) failed to lift the Q4 GDP very much, providing zero contribution (+0.02 point). Private consumption added just 0.1 (0.06) point and capex also disappointed with zero contribution (+0.04 point).

– Tuesday, March 3
1300 JST (0400 GMT Tuesday, March 3/2300 EST Monday, March 2) Bank of Japan Governor Kazuo Ueda delivers a brief 15-minute speech on “the new financial ecosystem and the role of central banks” at FIN/SUM2026, a fintech conference on “the new financial ecosystem shaped by AI and blockchain” jointly hosted by the Nikkei media group and the government watchdog Financial Services Agency.

– Wednesday, March 4
1400 JST (0500 GMT/0000 EST Wednesday, March 4) The Cabinet Office releases the February consumer confidence survey. The confidence index rose a seasonally adjusted 0.7 percentage point on the month to 37.9 in January to hit the highest level since April 2024 (38.2) after falling 0.3 point in December for the first drop in five months. The Cabinet Office maintained its assessment that consumer confidence as “picking up.”

– Friday, March 6
1400 JST (0500 GMT/0000 EST Friday, March 6) The Bank of Japan releases the January supply-side consumption activity index, which has a close correlation to the revised series of gross domestic product. It will indicate how private consumption kicked off the year after ending 2025 in a weak tone.

The index dipped a seasonally adjusted 0.4% in December after rising 0.4% in November and falling 0.6% in October, resulting in a 0.2% slip on quarter in the final three months of 2025 after rising 0.6% in the previous quarter. Figures exclude inbound tourism consumption but include outbound tourism spending.