🛢️💱Japan Most Exposed G10 Country to Oil Swings: Cable FX Macro

• Japan has one of the highest exposures to crude oil price fluctuations among major economies, primarily because it is almost entirely dependent on imports for its oil needs and relies heavily on oil in its energy mix. This vulnerability is amplified by heavy concentration in Middle East supplies, making it particularly sensitive to geopolitical disruptions (like the current US-Israeli strikes on Iran and risks around the Strait of Hormuz).

• The most recent metrics show that oil products account for about 36.5–37% of Japan's total primary energy supply (TES) in recent years (e.g., 36.5% in 2024 per IEA data). The chart below shows data as of 2023; the reason is to provide a relative comparison to other G10 countries.

• Events unfolding over the weekend failed to push JPY higher vs G10FX peers; historically, the yen gets bid in risk-off trading. However, Japan's vulnerability to the Middle East region is playing out and taking the yen down with it. Most of Japan's reliability of crude oil is highly concentrated in the Middle East, the region accounts for 95% of Japan's crude imports. Adding to uncertainty is the fact that around 70% of Japanese crude oil imports need the Strait of Hormuz to transit.

• Following this, most European countries in our selected list hold a double-digit percentage of energy imports. It is not surprising to see EUR among bottom performers today. The SNB's vocal intervention on the CHF may have helped partially.