Japan Buying Oil at US$ 70

Posted on 04/03/2023

Japan is paying more for Russian oil, but it is not a sign of a shaking alliance. The country has been granted an exemption by the U.S. and G7 countries to buy Russian oil above the price cap of US$ 60 per barrel. Japan largely lacks homegrown energy, which is one reason for its reliance on nuclear power. After the Fukushima nuclear disaster, Japan shifted to a heavier reliance on oil. Japan is the fifth-largest consumer of oil and fourth in the world for importing oil. Japan also imports more coal than any other country except China and India. It is the fifth largest energy consumer, though growth has faded due to demographic shifts that see a greater share of the population reaching elderly ages.

The yen has lost ground to the U.S. dollar in recent days, hitting a low of 133 per dollar. Japanese manufacturers, though, are signaling pessimism. Bright spots for the economy include a bustling tourism trade and private consumption. Additional spending can be expected for the upcoming Golden Week, a cluster of holidays when the majority of the population is on vacation.

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