TOKYO, April 15 - A growing number of Japanese companies whose operations depend on naphtha or naphtha-derived materials have begun to halt new orders or cut production, underscoring a gap between official assurances of adequate supply and conditions reported by manufacturers and distributors.
Over the past week, more than a dozen firms - among them Toto and Asahi Kasei - have reported either delivery interruptions or price increases. The companies cited difficulties in procuring materials such as adhesives that use solvents based on naphtha, an oil derivative commonly employed as a solvent or diluent. Manufacturers of products tied to thinners, including Kansai Paint, have also modified delivery schedules and raised prices. Those adjustments add uncertainty for downstream sectors that rely on these inputs, including producers of plastic toys and companies involved in housing construction.
A survey conducted last week by the Japan Painting Contractors Association found that only 2.7% of respondent companies were able to obtain thinner as usual. That shortfall reflects constraints that are not solely at the crude-oil sourcing level but appear to be concentrated within segments of the supply chain.
Tokyo has repeatedly stressed that the country has sufficient naphtha for the next four months and says it is working to secure supplies beyond the Middle East. Before the U.S. and Israel attacked Iran on February 28, Japan sourced 40% of its naphtha from the Middle East, officials note. The government has also established consultation services to assist businesses with procurement decisions before they resort to operational changes.
Despite those measures, some manufacturers are already adjusting their commercial activity. Toto this week stopped accepting orders for modular bathroom units that require adhesives formulated with solvents that contain naphtha. Rival builders and suppliers, including Lixil, Panasonic and Cleanup, have likewise reported impacts to delivery schedules.
Kansai Paint and other thin-related manufacturers face an additional constraint in that the hazardous nature of thinner limits how much stock they can legally hold. Those restrictions have influenced how manufacturers and distributors have rearranged logistics and pricing in recent days.
Countries including South Korea, Thailand and Bangladesh have responded to disruptions to Middle East oil product supplies by encouraging conservation measures such as reduced driving or shorter showers. In Japan, Prime Minister Sanae Takaichi has declined to call for such measures, saying she does not want to slow economic activity, and has tasked industry minister Ryosei Akazawa with ensuring a steady flow of oil-related products.
Akazawa described the problem as a "blockage" in the middle of the supply chain. He said, for example, that some thinner wholesalers halved supply to customers in April after being advised that shipments would be uncertain in May. That intermediate-level disruption - wholesalers reducing deliveries in anticipation of future shortages - is one of the drivers behind the operational curbs reported by manufacturers.
An unnamed government official involved in economic policy explained this approach by saying, "For Prime Minister Takaichi, the economy comes first. She doesn’t say anything that would be difficult for citizens. This is the administration’s policy." A second official, speaking on condition of anonymity, said there is concern within the administration and the industry ministry about prompting consumer panic similar to the hoarding seen during the 1970s oil crisis. The second official said, "We should really be calling on people to save energy now but the prime minister’s office has put a stop to that. We’ve already said we have enough supply so if we were to ask for conservation measures, we might invite criticism, and that’s the fear."
On markets, shares of companies dependent on naphtha inputs - including Toto, Kansai Paint and Mitsubishi Chemical - have lagged Tokyo’s benchmark Nikkei share price average, which has recovered most of the losses incurred since the onset of the Middle East conflict triggered broader risk-off sentiment.
Tomoichiro Kubota, senior market analyst at Matsui Securities, warned of an inventory risk for producers. "Even if producers could ramp up output regardless of cost ... they risk being stuck with high-priced inventory if prices eventually drop," he said. He added that the administration’s focus on protecting economic sentiment limits the scope of targeted interventions, calling the response "like a game of whack-a-mole."
Impacted sectors and downstream effects
- Construction and housing - through adhesives and thinners used in building materials.
- Consumer goods manufacturing - including plastics and toys reliant on naphtha-derived solvents.
- Chemicals and coatings - producers of paint and thinner-related products facing legal stock constraints and altered delivery patterns.
Current government stance
The government maintains a short-term supply buffer for naphtha and is seeking alternative sourcing outside the Middle East while offering procurement consultation services for businesses. Officials have avoided public calls for conservation to prevent economic slowdown and consumer panic.
Market signals
Equities of naphtha-dependent companies are underperforming the Nikkei average as investors weigh production cuts, price increases and potential downstream demand impacts. Analysts point to the risk of mis-timed inventory accumulation by producers who might expand output at higher costs.