Hormuz Strait Disrupted, Japanese Industrial Production Declined

A photo from a Kyodo News helicopter shows a US oil tanker arriving in Tokyo Bay, Japan. (Kyodo)

JAKARTA - The Middle East conflict is beginning to be felt in Japanese factory machines. Japanese industrial production in March fell 0.5 percent from the previous month, mainly due to disruptions in chemical raw material supplies.

As reported by Kyodo News, Thursday, April 30, Japanese government data released Thursday showed the decline occurred after February's production also fell 2.0 percent based on the latest revision.

The Japanese Ministry of Economy, Trade and Industry maintained its basic assessment. Industrial production is said to still be "fluctuating without a clear direction".

The biggest pressure came from the inorganic and organic chemical sectors. This sector declined by 8.6 percent due to the decline in polyethylene, synthetic rubber, and ethylene production.

The root of the problem lies in the supply of naphtha. This material is important for making chemical products used in plastics to important medical supplies. Its supply was disrupted after the Strait of Hormuz was effectively closed following the US-Israeli attack on Iran on February 28.

Ministry officials also said that regular inspections of the naphtha cracking furnace also put pressure on ethylene production. Domestic production capacity fell by almost 40 percent in March.

However, the Japanese government has not seen the disruption as a supply crisis. "By utilizing inventories, shipments of major petrochemical products have not changed from the previous year's level, and the supply level has been maintained," said the official.

Production of petroleum and coal products, including gasoline, diesel, and naphtha, also fell 7.7 percent. However, Japanese officials said the decline was more due to "technical" factors in seasonal adjustments, not directly due to the Middle East crisis.

The automotive sector also fell slightly due to weakening exports. Previous trade data showed Japanese car shipments to the Middle East region had decreased.

Even so, the ministry has not mentioned that Japanese industry is weak overall. "We do not see overall industrial production weakening after the January-March quarter average recorded an increase and manufacturers' production plans indicate that the index will rise in April and May," the ministry said.

Japan's seasonally adjusted factory and mining production index was at 101.9, with a 2020 base of 100.

Based on a survey of manufacturers, output is expected to rise 2.1 percent in April and 2.2 percent in May.

However, the room for optimism is not wide. Economists predict that April data will more clearly show the impact of the Middle East conflict. The Strait of Hormuz is still effectively closed. The problem of crude oil, naphtha, and fertilizer supplies is also not over. Some producers have even been forced to stop accepting orders.

The Japanese government stated that crude oil supplies could still be secured through domestic reserves and alternative sources. However, Takeshi Minami, chief economist at Norinchukin Research Institute, told Kyodo News that there was a "significant downward pressure" on production activities if shipping through the strait had not fully recovered.

Over the 2025 fiscal year, Japanese industrial production fell 0.2 percent to 101.2. This is the fourth consecutive year of decline. According to government officials, one of the pressures came from higher tariffs imposed by US President Donald Trump.