Israel-Iran Conflict Affects Japanese Economy

Israel launched attacks on nuclear facilities in Iran on June 13th, killing top generals and scientists. Iran immediately retaliated with missiles on the cities in Israel. The exchange of military attacks reflects current failure in nuclear talks within the framework of related countries including the United States. As a country heavily dependent on oil from Middle East, Japan considers measures dealing with possible rise of oil price. 

International Atomic Energy Agency (IAEA) passed a resolution on the day before Israel’s attack on Iran, which accused Iran of breaching non-proliferation duties. Hastened by a possibility of further development of Iran’s nuclear program, Israel launched attacks on key nuclear facilities in Iran, including one in Natanz. Iran immediately made missile attacks on Tel Aviv and Haifa, causing casualties and deaths. The military engagement is expanding with damages on energy facilities in Iran.

 

Minister for Foreign Affairs, Takeshi Iwaya, issued a statement on the conflict between Israel and Iran, condemning Israel of using military means amid diplomatic efforts such as U.S.-Iran talks. “The government of Japan is gravely concerned about the exchange of retaliatory attacks and strongly condemns any action that could further escalate the situation,” said Iwaya in his statement.

 

Japan has been continuing its effort to promote nuclear talks between Iran and the western countries. Iwaya urged Iranian foreign minister, Abbas Araghchi, to take the opportunity of direct negotiation with the U.S. in their telephone talk earlier this month. Israel’s military operation discourages Japan’s effort to help them reach a possible deal.

 

Shigeru Ishiba administration discussed situation and measures on the conflict in the ministerial meeting of National Security Council. Ninety percent of imported crude oil to Japan is from the Middle East. The oil price in international market is rising after Israel’s attack on Iran. Japanese government concerns about Iran’s blockade of Strait of Hormuz, where most oil tankers pass. Although gasoline price has been declining for these weeks, it is speculated that the price will rise again for the time being.

 

Tokyo Stock Market marked consecutive declines. On June 13th, the day of Israel’s attack on Iran, Nikkei 225 marked 0.89 percent drop from the previous day. It is expected that instability in Middle East may affect management of companies depending on foreign demands with higher cost caused by rise of oil prices. Foreign exchange showed appreciation of Japanese yen against U.S. dollar, which went to 142 yen for a dollar. 

 

Iwaya has been expressing his concern on humanitarian situation in Gaza suffering from military attacks by Israel. Japan has been distancing from the U.S. which supports Israel on this issue. It is likely that Japan-U.S. relationship will be affected by escalation in Israel-Iran conflict, if the U.S. Trump administration takes a position leaning on Israel side.

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