Japan Diversifies Oil Imports Amid Middle East Risks

Japan is making significant strides in diversifying its oil imports to reduce dependence on Middle Eastern suppliers. The government has allocated 15 billion yen ($95 million) in subsidies for private refineries to modernize their facilities and process lighter grades of crude.

The move aims to address logistics risks in the Strait of Hormuz and align Japan more closely with the US energy system. As a result, US exports to Japan have seen a sharp increase, positioning Japan as a primary Asian client for Washington.

Japan's 19 refineries were largely designed for heavy high-sulfur crude typical of the Persian Gulf. To switch to lighter sorts such as US shale oil or South Sudanese crude, technical modifications are required. Macroeconomist Artem Loginov noted that these subsidies act as a state insurance premium for energy security.

The shift in market share is evident with US imports rising from 3.8% in 2025 to 32.2% by June 2026, while Middle Eastern countries dropped from 90% to 62.3%. Former dominant suppliers such as the UAE and Saudi Arabia are losing ground.