Japan’s government is considering scaling back gasoline subsidies from as early as December amid growing concerns that funding for the costly measure could eventually run short, two ruling party officials familiar with the matter told Reuters on Friday. The emergency measure was introduced in March to cushion households and businesses from a surge in oil prices following the start of the US-Israeli war with Iran.
As crude oil prices remain elevated, the measure is costing the government several billion dollars a month to keep the nationwide average price of regular gasoline at about 170 yen, or 1.09 dollars, per litre, rapidly depleting the 3.1 trillion yen supplementary budget approved in June. Under a proposal being discussed by the government and the ruling coalition, weekly subsidies paid to fuel distributors could be gradually reduced, pushing average retail gasoline prices to around 175 yen per litre in December and 180 yen in January, the officials said.
The debate runs alongside a second cushion. Japan’s government has begun considering other measures to shield households from rising energy costs, including the possible re-introduction of gas and electricity subsidies that expired in September, and Prime Minister Sanae Takaichi’s planned reduction in the consumption tax on food and beverages from April next year. Once the consumption tax cut begins, households will feel less financial pressure, one official told Reuters, adding that the aim is to reduce gasoline subsidies as much as possible by then.
Japan has been among the countries most exposed to the Middle East war because it imports almost all of its energy, much of it from the Persian Gulf. A gasoline phase-out in December would therefore be a fiscal decision taken while the underlying import price is still rising, not after it has normalised.