Japan’s Cabinet approves compensation for bypassing the Strait of Hormuz — Channel NewsAsia

Japan’s Cabinet on October 13 approved three bills to strengthen energy supply security. Among them is a mechanism to compensate importers for additional costs of transporting crude oil and fuel via alternative routes that bypass the Strait of Hormuz, Channel NewsAsia reports.

Compensation and insurance

Industry Minister Ryosei Akazawa said the government seeks to diversify sources of crude oil and other fossil fuels and reduce the related risks. The bills are planned to be submitted to parliament during the current extraordinary session.

One of the documents provides for a grant program to compensate for higher transport costs when oil and fuel are purchased via routes bypassing critical chokepoints, including the Strait of Hormuz. It will be financed by contributions from a broad range of importers — oil refining companies, traders and petrochemical product manufacturers.

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Another bill is intended to allow the government to partially cover insurance payouts for oil tankers and vessels carrying petroleum products and liquefied natural gas. This mechanism will be used if foreign reinsurers are unable to provide coverage due to heightened geopolitical tensions.

Dependence on supplies from the Middle East

Amendments to legislation on the state organization JOGMEC are expected to enable it to invest in infrastructure for alternative supply routes, including pipelines.

In 2025, Japan received 94% of its imported crude oil from the Middle East, with 93% of those supplies passing through the Strait of Hormuz. According to Akazawa, oil purchases in October are expected to amount to about 100% of the average monthly supply volume for 2025, ensuring the necessary volumes of oil and petroleum products.