Iran War vs Israel-US Disrupts Economy, Japan Warns of Petrol Price Surge

Pressure from inflation is once again hitting Japan’s economy following the Iran war, which has triggered new concerns over a surge in global energy prices. Japan’s core inflation was recorded to have risen for the first time in the last five months in March 2026.

Government data shows that core inflation rose to 1.8% in March. This figure is higher than February’s level of 1.6% and aligns with economists’ forecasts surveyed by Reuters.

Meanwhile, headline inflation was recorded at 1.5%, up from 1.3% in February. Although increasing, the figure remains below the Bank of Japan’s 2% inflation target for two consecutive months.

Inflation excluding fresh food and energy prices, however, fell to 2.4% from the previous 2.5%. This is the lowest level since October 2024.

This surge in inflationary pressure is occurring amid concerns over rising crude oil prices due to geopolitical conflict in Iran. The Japanese government is beginning to prepare various measures to dampen its impact on the public.

Japanese Prime Minister Sanae Takaichi is considering various policies to curb the surge in fuel costs, including petrol price restrictions.

Tokyo has also released crude oil reserves from national stocks to reduce the potential shock from global oil prices. In addition, fuel subsidies have been rolled out since March.

Takaichi plans to cap the national average petrol price at 170 yen per litre, or about US$1.07, equivalent to Rp18,190 per litre (exchange rate of Rp17,000 per US dollar). The government warns that without intervention, petrol prices could soar to 200 yen per litre, or about Rp34,000 per litre.

If petrol prices truly approach 200 yen and are capped at 170 yen, the subsidies are estimated to cost around 300 billion yen per month. Thanks to various government supports, including a temporary suspension of petrol taxes, energy costs were recorded to have fallen 5.7% in March.

However, analysts from Credit Agricole Corporate and Investment Bank (CACIB) warn that inflation risks are not over. “The rise in crude oil prices driven by geopolitical risks is expected to complicate the movement of price indicators,” they said, as quoted from CNBC on Friday, 24 April 2026.