Japan–Iran Relations: Economic and Diplomatic Overview

Al Bawaba

2 days ago

Dr. Gil Feiler
Japan and Iran have maintained a complex yet enduring bilateral relationship shaped by mutual interests, geopolitical constraints, and economic interdependence. Despite Japan's close alliance with the United States and its adherence to international sanctions regimes, it has historically pursued a pragmatic approach to Iran, primarily driven by its energy needs and regional stability considerations.
Japan and Iran established formal diplomatic relations in 1929. During the reign of Mohammad Reza Shah, the two countries maintained warm ties, especially due to Japan's need for Iranian oil. After the 1979 Islamic Revolution, relations cooled but never broke. Japan chose a moderate stance, unlike Western powers, maintaining embassy-level ties and limited political engagement.
Over the decades, Japan has consistently positioned itself as a neutral mediator between Iran and the West. This is evident in Japan's multiple diplomatic efforts to reduce tensions over Iran's nuclear program, particularly during the U.S. withdrawal from the JCPOA (Joint Comprehensive Plan of Action) under the Trump administration. Prime Minister Shinzo Abe's historic visit to Tehran in June 2019 — the first by a Japanese premier in over 40 years — symbolized Tokyo's commitment to dialogue and stability.
In the wake of rising tensions between Iran and Israel and the broader Middle East crises of 2024–2025, Japan has renewed its call for de-escalation. Tokyo has Urged restraint on all sides following the Iranian-Israeli conflict; Maintained diplomatic channels open with both Tehran and Washington; and supported multilateral efforts for a renewed nuclear agreement.
Japan's Foreign Ministry continues to underscore the importance of regional peace for global energy security — a key interest for a resource-scarce nation like Japan.
Energy Cooperation: The Backbone of Bilateral Trade
Historically, oil was the cornerstone of Japan–Iran economic ties. Until 2011, Iran was one of Japan's top oil suppliers. However, following international sanctions and U.S. pressure, Japanese firms dramatically reduced Iranian crude imports.
In 2012, imports were slashed under U.S. sanctions. After the JCPOA in 2015, Japan resumed limited oil imports. With the re-imposition of U.S. sanctions in 2018, Japanese companies again halted purchases. As of 2025, Japan does not import Iranian oil due to international sanctions and insurance restrictions, though Japanese policymakers quietly support a return to trade once legally permissible.
Despite sanctions, Japanese companies have historically shown interest in Iran's untapped market. Sectors include: Automobiles: Iran was once a major market for Toyota and Mazda; Infrastructure & Engineering: Japanese firms had interest in rail, port, and refinery modernization; Medical Equipment & Pharmaceuticals: Considered 'humanitarian goods,' trade in this area continued even under sanctions.
In 2016, Japan extended a 10 billion USD credit line to Iran to support trade and development following the JCPOA — although much of it remained unused due to U.S. policy reversals.
As of 2025, Japanese companies operate cautiously. Direct investments are minimal due to Sanctions enforcement; Payment channel restrictions; and U.S.-Japan security alliance constraint
Japan promotes cultural ties with Iran through university exchanges, academic collaboration, and language programs. Tehran has an active Japan Foundation branch. Persian scholars and students frequently travel to Japan, while Japanese films and culture retain a niche following in Iran.
In response to natural disasters and public health needs, Japan has provided consistent humanitarian aid to Iran. Notable recent efforts include: COVID-19 medical support; Earthquake relief efforts in Kerman and Hormozgan provinces; and food aid and water resource development under the JICA (Japan International Cooperation Agency).
Japan must carefully balance its interests. Its alliance with the United States imposes limits on full engagement with Iran. Yet Japan values Iran's geostrategic position and economic potential. Thus, Tokyo maintains a strategy of quiet diplomacy with Tehran and public support for multilateral agreements, while ready to re-engage economically once conditions improve, ie, investment in energy and infrastructure, post-sanctions engagement, and use of Japan's soft power
To conclude, Japan–Iran relations remain defined by pragmatism, caution, and potential. While energy trade is currently dormant due to sanctions, Japan retains goodwill in Tehran and is poised to re-enter the market if geopolitical conditions permit. Diplomatically, Tokyo plays a vital role as a trusted interlocutor and advocate of de-escalation. Economically, Japan continues to signal interest, albeit quietly, in Iran's post-sanctions future — particularly in oil, infrastructure, and technology sectors.