Japan approves additional 3.1 trillion yen budget to address impact of rising energy costs
Tokyo (ANTARA) - The Japanese cabinet approved a draft supplementary budget of 3.11 trillion yen (approximately 19.5 billion US dollars) on Wednesday (June 3) to address the impact of rising energy prices amid the ongoing conflict in the Middle East.
The draft law is expected to be approved by parliament on Friday (June 5). However, the need for the supplementary budget, which has emerged just over two months into the current fiscal year, which began in April, has reignited concerns about the country’s deteriorating fiscal health and rising inflation.
The supplementary budget will create a reserve fund of 2.5 trillion yen to respond to the surge in energy prices and other impacts of the situation in the Middle East, particularly by increasing the allocation of funds for petrol subsidies.
Since March, in order to address inflationary pressures triggered by the situation in the Middle East, the government has provided subsidies to wholesale oil traders to limit retail petrol prices to around 170 yen per litre, and has funded these subsidies with approximately 800 billion yen taken from the fiscal year 2025 reserve fund.
According to the Japanese Ministry of Finance, the current funds for petrol subsidies could be depleted in the coming months if they continue to be used at the current rate. The balance of the fund was 670 billion yen at the end of May, after 310 billion yen was disbursed in April alone.
The additional expenditure includes subsidies of 513.5 billion yen from July to September to help households cope with rising energy costs this summer.
The supplementary budget also sets aside 100 billion yen that can be used independently by local governments, such as subsidies for households using LPG and businesses using extra-high voltage electricity.
Japan is highly dependent on the Middle East for crude oil imports. Following the launch of US-Israeli attacks on Iran at the end of February and the effective closure of the Strait of Hormuz, the ruling and opposition parties in Japan have called on the government to draw up a supplementary budget to address rising crude oil prices.