Global Economic Impact — 2026-03-27

Japan Reverses Coal Plant Restrictions to Cope With Iran War Energy Shock

Japan will allow less-efficient coal-fired power plants to participate in capacity market auctions starting in April, reversing prior clean energy restrictions to address the energy crisis triggered by the effective closure of the Strait of Hormuz. Japan relies on the region for approximately 95% of its crude oil and 11% of its LNG imports, with 70% and 6% respectively transiting the Strait. The move signals broader Asian energy security concerns; the conflict is pushing up fuel costs, electricity prices, and food prices while threatening recent real wage gains.

Analysis
Japan's reversal on coal restrictions, just months after climate commitments, illustrates how quickly energy security concerns override climate policy when supply is threatened. With 95% oil and 11% LNG dependence on the region, Japan is the developed economy most exposed to the Hormuz closure. This decision will cascade: other energy-dependent Asian economies will follow.

2 sources

Japan to allow more coal-fired power to cope with energy shock - Japan Times
Japan to temporarily lift coal power plant curbs over Hormuz crisis - Nikkei Asia