Economy Japan sees faster inflation impact from Iran war than in previous oil shocks

Higher crude oil and petrochemical prices are reaching Japanese consumers faster than before, pushing up the cost of a wide range of everyday goods. At Tochigiya, a long-established tofu shop near Tokyo's Sensō-ji temple, the price of unpressed tofu rose on 1 May from 220 yen ($1.40) to 250 yen ($1.60). Staff said the increase was linked to higher costs for the plastic trays used to package the tofu. According to the shop, the tray supplier warned of the increase in early April, roughly a month after crude oil prices jumped following the start of the US war with Iran. The supplier reportedly said prices would rise by "at least 30%". One employee said the shop had never experienced such a rapid increase before.

The trays are made from plastic derived from propylene, which itself comes from naphtha, a petrochemical raw material that Japan largely imports from the Middle East. Supplies have reportedly been affected by the effective closure of the Strait of Hormuz. Normally, higher crude oil prices take around six months to filter through to retail prices in Japan. Tochigiya, however, raised prices after only two months. The speed of price increases differs by industry and product, but recent oil price rises appear to be feeding into consumer prices unusually quickly across many sectors.

The Nikkei Commodity Index, a wholesale price gauge sensitive to changes in economic conditions, stood at 294.176 at the end of April, up 3.5% from the previous month and a record high. The index reflects price movements in transactions among companies for 42 major commodities, such as steel and lumber, providing a broad view of upstream price trends. April's rise was driven by a sharp increase in chemical prices, with the chemical index climbing 18%. That was slightly more than the increase in December 1973 during the first oil crisis. The inflationary hit at that time triggered Japan's first postwar economic contraction in fiscal 1974.

Click to expand...

Paywall alert:

The propaganda machine here in the US sure got it all wrong. Way back when the US took the leader in Venezuela into custody , they said the world market would be flooded with their cheap oil bringing prices down everywhere. Hummm?? Didn't happen. Then about a week after the Iran invasion , Trump announced the US had tons of cheap oil and gas ready to be sold and picked up. Hummmm?? didn't happen? I expect about a year from now , Iran will still have nukes and we all got screwed for nothing.

Grandpa Frank said:

Iran will still have nukes and we all got screwed for nothing.

Click to expand...

At this point, that's pretty much best case scenario. If you want to consider worst case scenario, see here. I won't believe it until I hear this from legitimate sources but certainly there are kernels of truth in what he's saying.

mdchachi said:

If you want to consider worst case scenario, see here.

Click to expand...

That's quite a Mad Max scenario!


I cannot comment on the majority of points he raises, but this is certainly wrong:

Europe faces immediate exhaustion of inventories this month.

Click to expand...

Europe has months of emergency supplies.

Where he is sadly right is that East Asia - China, Japan, and South Korea - is the most vulnerable region. It's not just petrol, but also naphta where we start to feel the crunch.

thomas said:

That's quite a Mad Max scenario!

Click to expand...

Indeed. But with Uranus entering Gemini the evidence is incontrovertible.