Japan will begin gradually cutting its gasoline subsidies in December, Prime Minister Sanae Takaichi said on Thursday, even as the cabinet committed fresh money to keep the program running into the phase down. The subsidy currently holds the nationwide average retail price of regular gasoline at about 170 yen a litre, and the government will raise that benchmark by 5 yen a month toward early spring. Takaichi declined to say when the mechanism would be fully phased out.
The cost is the reason. The per litre subsidy has reached 52.4 yen, the highest since the program began in 2022, and Takaichi said the government is spending more than 10 billion yen a day of taxpayer money to hold prices down. The cabinet decided on Friday to spend a further 1.1459 trillion yen, about 7.3 billion dollars, from fiscal 2026 contingency reserves to continue the subsidies, taking the program’s cumulative budget since 2022 above 10 trillion yen.
The support is being rotated, not simply removed. Subsidies for electricity and gas bills will resume from December through February, a month earlier than last winter, worth about 7,000 yen to a typical household over the three months on the government’s estimate. The gasoline measure itself was introduced in 2022, ended late last year when the former provisional gasoline tax rate was abolished, and was reinstated in March as Middle East tensions drove oil prices higher.
For oil markets the significance is demand honesty. A benchmark rising 5 yen a month re exposes Japanese motorists to the crude price in steps small enough to avoid a shock, at a moment when Brent sits above 110 dollars a barrel and Japan’s refiners buy in the same tight Asian product market as everyone else. Whether other importers follow Japan’s exit path, or keep paying to cap prices, is now an open fiscal question for the winter.