Japan has been decreasing its reliance on Iranian oil steadily since the 2006 sanctions took effect. Since 2007, Japan has reduced its imports from Tehran by roughly 40 percent, according to the Ministry of Economy, Trade and Industry. Roughly 500 barrels per day of Iranian crude oil imports have dwindled to 316 barrels per day over this period. That works out to be an 11 percent annual rate of reduction, which by 2010 had brought Japan down to the third largest importer from Iran after the European Union and China. In contrast, South Korea's crude oil imports from Iran increased by 20 percent in 2011, and China's imports rose by 30 percent.

Tokyo now must accelerate this rate of reduction to satisfy U.S. legal requirements and the rising political interest of the U.S. Congress. Japan has already promised to do so, but what remains to be negotiated is the speed of those reductions. Officials from the Japanese government are expected to visit Washington, DC, on Thursday to discuss how much faster Japan must cut its imports.

Part of that answer depends on alternate suppliers. Japan has already diversified its sources considerably. In 2010, Iran accounted for only 9.6 percent of Japan's oil imports, with Saudi Arabia (28.8 percent), the UAE (20.4 percent), and Qatar (11.8 percent) taking a leading role as Japan's crude oil suppliers. The continued cooperation of alternative crude oil suppliers, of course, will be critical to sustaining Tokyo's ability to meet its energy needs and find alternative source of supply. Foreign Minister Koichiro Gemba's visit to the region from January 5 to 12 demonstrates how keenly Tokyo depends on their willingness to continue upping their production.

Two additional challenges are also in the mix for Tokyo. The first is the financing of oil imports from Iran. Annually, Japan's oil trade with Iran runs around one trillion yen, or $13.1 billion. On January 19 the Nikkei Shimbun reported that 80 to 90 percent of those transactions are done by the Bank of Tokyo Mitsubishi UFJ, and the remainder by the Sumitomo Mitsui Banking Corporation. An exemption of Japan's banks from immediate affect of the new sanctions law, therefore, would allow Tokyo to manage the risk involved for two leading financial institutions as it moves forward in reducing its Iranian oil imports.

Beyond these specific calculations on the new sanctions, the deeper challenge for Japanese policymakers is the domestic politics of the sanctions debate itself. The growing perception in Japan is that cooperation in the sanctions effort against Iran only benefits other economic competitors, most notably China. In 2006, the Japanese government at the urging of the Bush administration ended its petroleum development project at Azadegan, seen to be one of the most promising untapped oil fields in Iran. Almost immediately thereafter the Chinese government concluded a deal with Tehran to take over the development project, ensuring that Beijing would have preferential access to the long-term oil stream that would result.