Japan Continues Petrol Subsidies, Public Concerned Over Fiscal Condition

Tokyo - Public concern in Japan is growing over the scale of petrol subsidies reinstated by the government to hold back price increases amid the Middle East conflict.

Finance Minister Satsuki Katayama said on Tuesday (7/4) that the government has not yet estimated the size of the subsidies.

“At this stage, we have not made an estimate of how much (subsidy) will be needed per month, because the volatility of West Texas Intermediate crude oil futures contracts is very high,” Katayama told reporters.

Concerns over deteriorating fiscal conditions are increasing in financial markets after the Japanese government decided on 19 March to continue the subsidies. Petrol prices have risen in line with the surge in oil prices since the US-Israel attack on Iran on 28 February.

The Japanese government initially used around 280 billion yen from certain funds to keep petrol prices around 170 yen (Rp18,176) per litre. However, as the funds are estimated to run out by the end of April, an additional around 800 billion yen (approximately Rp86 trillion) will come from 2025 fiscal reserves.

Analysts assess that the subsidy funds could run out in two to three months if oil prices remain high, necessitating additional spending plans.

The Japanese government has not ruled out using up to 1 trillion yen from reserves in the 2026 fiscal budget, although those funds are allocated for emergency responses, such as major natural disasters.

Petrol subsidies reached 49.8 yen (Rp5,325) per litre for the week until Wednesday (8/4), the highest since the programme was launched in January 2022, according to Japan’s Ministry of Economy, Trade and Industry.

The ministry adjusts subsidies weekly based on projections of retail prices for the following week, which reflect changes in crude oil prices.

Thanks to the subsidies, the average retail price of petrol has fallen to around 170 yen per litre after reaching a record 190.80 yen per litre on 16 March.

A Kyodo News survey at the weekend showed that 69.6 percent of respondents want the government to continue providing subsidies to suppress petrol prices.

Source: Kyodo-OANA