Tokyo stocks declined for a third consecutive day as tensions escalated in the Middle East over Iran. Bank of Japan Governor Kazuo Ueda warned of significant potential impacts on the economy, while the government stated there would be no immediate disruptions to oil supplies.
On March 4, 2026, Japan's Nikkei 225 stock average closed at 54,245.54, down 3.61%, marking its lowest level in a month and a third straight day of declines following drops of 3.06% on Tuesday and 1.35% on Monday. The index erased all gains since Prime Minister Sanae Takaichi's landslide election victory on February 8.
Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust Asset Management, noted that 'investors who bought Japanese stocks after Takaichi’s decisive win at the election dumped the shares in the latest sessions.' He sees the 52,000 level as a defensive line, with potential for further slips if breached.
Bank of Japan Governor Kazuo Ueda told parliament that 'depending on how the situation unfolds going forward, it could have a significant impact on the global economy and Japan’s economy through channels such as crude oil and other energy prices, as well as international financial markets.' This caution reinforces expectations that the BOJ will hold policy steady at its March 19 meeting, with little appetite for raising the benchmark rate. Japan relies on the Middle East for over 90% of its crude oil imports, much of which passes through the Strait of Hormuz.
Prime Minister Takaichi stated during a House of Representatives budget committee session that electricity and gas prices would not rise immediately even if the Strait of Hormuz is shut down due to the Iran situation. Only 6% of Japan's imported LNG comes via the strait, and she emphasized responding by increasing supplies from other countries and the spot market. Prices are based on imports from two to four months prior. She added that the possibility of a supplementary budget bill is 'not zero if it is urgently needed and [the impact] is prolonged.' Takaichi is scheduled to meet U.S. President Donald Trump on March 19 to discuss Iran issues.
The government said there is no immediate impact on oil supplies due to stockpiles totaling 254 days' worth as of late December, with no plans for releases now but possible if the conflict prolongs. Economy, Trade and Industry Minister Ryosei Akazawa clarified that releases aim to ensure stable supply, not suppress prices. The ministry established a response headquarters on Monday to assess impacts.
Chief Cabinet Secretary Minoru Kihara said Japan would weigh exercising collective self-defense on a case-by-case basis for a potential Hormuz blockade. The government has avoided judging the U.S. attacks on Iran, stating more time is needed for a legal assessment.
