This article originally appeared in WGI.World.
By Stephen Nagy, June 30, 2025
Japan’s post-war foreign policy has been built on four pillars: the Japan-U.S. security alliance, economic integration with the Indo-Pacific (Asia), stable and well governed sea lines of communication (SLOCs), and energy security through Middle Eastern partnerships including Iran. The U.S.-Israeli attacks with Iran stresses all four simultaneously, forcing Tokyo into impossible choices that could reshape the regional order for decades to come.
In no uncertain terms, the U.S and Israeli military action against Iran have consequences that will reverberate beyond the Middle East. The consequence will challenge Japan’s diligently calibrated Free and Open Indo-Pacific plan.
Policy makers in Kasumigaseki and political leaders are now faced with the potentiality of the unraveling years of diplomatic and economic progress in the region first begun under the late PM Abe Shinzo in 2007 when he laid out his vision for the “ Confluence of the Two Seas’’ at the Parliament of the Republic of India on August 22, 2007.
Japan imports approximately 90-95% of its oil from the Middle East, with Iranian crude historically accounting for a significant portion before sanctions. The military action against Iran has already triggered calls for a closure of the Strait of Hormuz, through which 20% of global petroleum passes according to the U.S. Energy Information administration. For Japan, this represents an existential threat to its economy unlike the U.S., which has achieved relative energy independence, Japan remains critically vulnerable to Middle Eastern supply disruptions.
The immediate economic impact could be catastrophic. Oil prices could spike to $150-200 per barrel, triggering inflation throughout the Japanese economy just as it emerges from decades of deflation. Manufacturing costs would soar, making Japanese exports less competitive precisely when the country needs growth to manage its massive public debt. The Bank of Japan would face an impossible choice between raising interest rates to combat inflation or maintaining monetary stimulus to support growth.
More troubling still would be the long-term strategic implications. Japan has spent years diversifying its energy partnerships, including increased LNG imports from Australia and renewable energy investments across Southeast Asia. A Middle Eastern conflict would accelerate this diversification but at tremendous cost, potentially making Japanese industry uncompetitive during the transition period.
How could an already debt laden Japan absorb this cost as it is also being urged by the U.S. to increase defense spending between 3.5-5% of GDP and manage the coming tsunami of social-welfare costs associated with its double demographic crunch, a rapidly greying and shrinking youth population?
The consequences of U.S.-Israeli strikes to take out Iran’s nuclear capabilities will complicate existing contradictions in Japan’s relationship with China. Beijing has already voiced its opposition to the U.S.-Israeli military action, attempting to paint the U.S. and Israeli action as missiles disguised as dovish calls for peace. It may even potentially use its U.N. Security Council position to condemn the operation or attempt to pass a motion in the General Assembly by courting the so-called Global South to condemn the U.S. and Israeli actions as warmongers.
Japan has found itself caught between its U.S. -Japan alliance obligations and the need to maintain stable relations with its largest trading partner. PM Ishiba Shigeru has already tried to avoid directly addressing the issue by stressing the importance of de-escalating the situation while stressing that Iran’s nuclear development must be “blocked’’. His comments embodied the Japanese axiom of 臭いものに蓋をする (Kusai mono ni futa wo suru), hoping the problem/stink will go away by sweeping it under the rug instead of supporting the U.S.’ efforts to rid the world of another nuclear armed state.
Economically, the strikes will negatively affect China’s economy alongside Japan’s from energy price spikes, potentially reducing Chinese demand for Japanese components and industrial machinery. This economic slowdown could paradoxically increase Chinese assertiveness in the East and South China Seas as Beijing seeks to deflect domestic discontent through nationalist appeals. Japan may face increased military pressure precisely when its economy is most vulnerable.
Furthermore, a U.S.-Israeli action may push China and Russia closer together in an anti-Western alignment, with Iran as a junior partner. This would fundamentally alter the Indo-Pacific balance of power, potentially creating a Eurasian bloc opposed to the U.S.-led order that Japan depends upon for its security. Tokyo would struggle to maintain its strategic autonomy in such a polarized environment.
The implications for Japan’s relations with ASEAN nations will be impacted in complex ways. Countries like Indonesia and Malaysia, with significant Muslim populations, will likely condemn the attack on Iran, complicating Japan’s efforts to build strategic partnerships as a counterweight to China. The economic disruption will hit Southeast Asian economies hard, reducing their capacity to purchase Japanese goods and potentially triggering political instability.
Vietnam and the Philippines, which have partnered with Japan on maritime security, may already be questioning Tokyo’s reliability if Japan is seen as automatically supporting U.S. military adventures. This could undermine years of patient Japanese diplomacy aimed at building a network of regional partnerships independent of the U.S. -Japan alliance.
The disruption to global shipping through the Middle East will impact Singapore and Malaysia, crucial nodes in Japan’s supply chain networks. Japanese corporations have invested billions in Southeast Asian manufacturing facilities predicated on stable shipping routes and energy supplies. These investments could become stranded assets in a prolonged Middle Eastern conflict.
Japan’s security treaty with the U.S. has been the cornerstone of its foreign policy since 1951, but it increasingly resembles a trap rather than a guarantee. Washington expects Japanese support for any action against Iran, potentially including logistical support from U.S. bases in Japan. Such support could make Japan a target for Iranian retaliation, possibly through cyber attacks or terrorism.
Yet refusing support will strain the Japan-U.S. partnership precisely when Japan needs U.S. backing against China in the context of the tariff negotiations between Tokyo and Washington. Conservative politicians and MAGA supporters in Washington might question the value of defending Japan if Tokyo won’t support U.S. priorities in other regions.
This dilemma reflects a broader challenge in the U.S.-Japan alliance. Washington increasingly views competition with China through a global lens, expecting allies to support U.S. positions from Ukraine to the Middle East. Japan, focused on its immediate neighborhood, sees these conflicts as dangerous distractions from the primary challenge of managing China’s rise. An Iran conflict would bring these divergent perspectives into sharp relief testing the limits of securitized Japanese foreign policy.
Faced with these challenges, Japan must pursue a multi-track strategy emphasizing diplomatic prevention, economic resilience, and strategic hedging. Tokyo should work with European allies to prevent military escalation, offering to mediate between Iran and its adversaries. Japan’s relatively positive relations with Iran, based on decades of energy partnership, provide unique diplomatic leverage.
Economically, Japan must accelerate its energy transition, accepting short-term costs for long-term security. This includes massive investments in renewable energy, improved energy efficiency, and strategic petroleum reserves. Tokyo should also deepen currency swap agreements with Asian partners to manage potential dollar shortages during a crisis.
Strategically, Japan must strengthen its autonomous defense capabilities while carefully managing alliance expectations. This means clearly communicating to Washington that automatic support for Middle Eastern military adventures could undermine the alliance’s primary purpose of Indo-Pacific stability. Japan should also deepen security partnerships with Australia, India, and European nations to reduce dependence on US military power.
The U.S.-Israeli military action against Iran may represent a strategic disaster for Japan, undermining every element of its foreign policy framework. The economic costs may be severe, the strategic consequences potentially irreversible. Japan’s ability to navigate between its U.S. alliance and Indo-Pacific partnerships would face its greatest test since 1945.
The tragedy is that such a conflict would distract from the genuine challenge facing the Indo-Pacific: managing China’s rise while maintaining regional prosperity and stability. Every dollar spent on Middle Eastern conflicts, every diplomatic initiative diverted to crisis management, represents resources unavailable for building the inclusive regional order that represents the Indo-Pacific’s best hope for peace.
We live in an era of the connectivity of war. The interconnected nature of the global economy means that military adventures in one region inevitably create casualties in others. Japan, caught between its alliance obligations and regional interests, will be among the foremost victims of a new Middle Eastern war. Preventing such a conflict isn’t just a humanitarian imperative—it’s essential for preserving the Indo-Pacific stability on which global prosperity depends.
Dr. Stephen R. Nagy is Professor of Politics and International Studies at the International Christian University, Tokyo and concurrently a Visiting fellow for the Hungarian Institute for International Affairs (HIIA,) a visiting fellow at the Japan Institute of International Affairs (JIIA,) and senior fellow at the Macdonald-Laurier Institute (MLI.)
