Japan Naphtha Shortage Disrupts Industry, Supply Chains Tighten

A shortage of naphtha is spreading across Japan, disrupting industries from food packaging to healthcare and construction, as import constraints and supply chain bottlenecks ripple through the economy and daily life.

From potato chip packaging losing its color, to food trays and retail branding turning monochrome, and further to tightening supplies of garbage bags and medical gloves, the impact of the naphtha shortage in Japan is broadening. The crisis has also begun affecting coatings and asphalt materials, delaying construction projects and, in some cases, forcing temporary suspensions.

Questions are mounting over the importance of naphtha, the severity of the shortage, and the structural causes behind what is increasingly being described as a systemic disruption.

Naphtha's Role in Modern Industry

Naphtha is a key derivative in crude oil refining and serves as a foundational input for modern manufacturing and the petrochemical industry. It is also considered an upstream material in semiconductor-related supply chains.

Through cracking processes, naphtha is converted into ethylene, propylene, and butadiene, which are then further processed into plastics, synthetic fibers, synthetic rubber, paints, adhesives, surfactants, and pharmaceutical intermediates.

In practical terms, everyday goods — including clothing, mobile phone casings, garbage bags, food packaging, medical supplies, vehicle interiors, and construction materials — are heavily dependent on downstream naphtha-based products. Any reduction or interruption in supply can quickly cascade across multiple industries.

Middle East accounts for a significant share of Japan's energy imports. As of the end of February, Japan's dependence on Middle Eastern crude oil stood at nearly 95%, while more than 40% of its naphtha consumption is also sourced from the region. Supply flows have been disrupted amid ongoing conflict and shipping constraints in the Strait of Hormuz, leading to import stagnation.

According to Japan's Ministry of Finance trade statistics, crude oil imports in April fell 63.7% year-on-year, marking the lowest monthly level since 1979, with particularly sharp declines in Middle Eastern supplies. Import prices rose 37.9% year-on-year, the highest level since comparable data began in 1979.

Market intelligence firm Kpler reported that Japan's imports of naphtha and other petroleum products fell about 30% month-on-month in March, with further declines in April.

A recent Kyodo News opinion poll showed 70.6% of respondents in Japan said they felt 'anxious' due to naphtha supply shortages.

Impact Across Consumer and Industrial Sectors

The shortage is driving up prices for plastic packaging materials and printing inks. Major food producer Calbee is expected to switch branding on some potato chip packaging from color to black and white, while FamilyMart is set to replace plastic trays in sandwiches with cling film. Retailer Ito-Yokado is replacing plastic trays for meat and sashimi products to reduce plastic use, and Aeon has eliminated traditional trays in some product lines.

Price pressures are expected to intensify further, with analysts forecasting another round of food price increases from June as packaging costs rise.

The impact extends well beyond food packaging. Garbage bag shortages have been reported in parts of Japan, particularly for designated bags used in waste separation systems, forcing temporary policy adjustments.

Manufacturers such as Unicharm and Daio Paper have announced price increases due to rising raw material costs, with diapers and related products seeing price hikes of 5% to 15%. Kao plans to raise prices of detergents this summer and postpone or cancel some seasonal autumn product releases.

Medical supply chains are also under pressure. Naphtha is a key input in the production of medical gloves, syringes, catheters, and infusion bags. Government data shows nearly 5,000 medical institutions across Japan reported shortages of medical supplies by the end of April, with most citing difficulty in obtaining medical gloves.

Construction materials, including insulation and coatings, are similarly affected. Builders warn that shortages could delay or halt projects while significantly increasing costs. The Japan Federation of Construction Contractors has submitted an emergency request to the Ministry of Land, Infrastructure, Transport and Tourism, urging action to resolve petroleum product supply constraints.

An analyst at the Japan Oil, Gas and Metals National Corporation said companies are facing sustained pressure from unstable supply and sharply rising prices of crude oil and derivatives, warning that tight supply-demand conditions for naphtha may become prolonged.

Structural Vulnerabilities Exposed

The naphtha shortage has exposed long-standing structural weaknesses in Japan's energy and petrochemical system, driven by concentrated import dependency and policy limitations.

Japan remains heavily reliant on imported energy, with supply sources concentrated in the Middle East and limited diversification. During rapid economic expansion in the 1960s and 1970s, demand surged, and relatively low-cost, high-volume crude from the Middle East became the dominant supply source.

Over time, Japan's refining infrastructure — from equipment to pipelines and process parameters — was optimized for processing Middle Eastern crude, reinforcing dependency in a feedback loop of specialization and reliance.

In addition, Japan's strategic petroleum reserves are primarily designed around crude oil and are not structured to automatically address shortages in petrochemical intermediates such as naphtha.

An associate professor at the University of International Business and Economics noted that successive Japanese governments have historically treated oil crises largely as fuel supply and macroeconomic issues, while underestimating the importance of petrochemical feedstocks such as naphtha.

He said policy responses in the current crisis have relied heavily on short-term measures, with limited long-term risk mitigation or energy transition planning, and that the government's ability to intervene is constrained by limited macroeconomic coordination tools and strong reliance on the private sector, which is insufficient under large-scale supply shocks.