Japanese small businesses are facing an existential crisis as soaring fuel prices and shortages triggered by the US-Israel war on Iran cripple operations nationwide. From hot spring inns to trucking companies, thousands of enterprises are grappling with a commodity price shock that threatens factory closures and halts wage growth. The Gulf energy crisis has exposed vulnerabilities in Japan's fragmented economy.

Prime Minister Sanae Takaichi has pledged emergency measures, increasing fuel subsidies by ¥800bn ($5bn) to cap petrol prices at ¥170 per litre. However, the Nomura Research Institute estimates the subsidy budget will be depleted by early July. Japan's highly fragmented economy, dominated by smaller businesses, lacks the pricing power of larger companies to weather the storm. Unlike larger firms that benefit from a weak yen, small businesses are hit hard when the domestic economy is under pressure.

Businesses are taking drastic measures: Masayoshi Yamaguchi is shutting his Katsuragi Onsen public bath after 27 years, while Seiko Transport is postponing wage rises of 3-5% scheduled for April. Fuel wholesalers are unable to supply diesel, leaving fleets dependent on petrol stations. The government is considering intervention in crude oil futures markets as part of broader efforts to protect households and businesses from surging energy prices and the weak yen.