JAPAN TODAY



 

The Japanese government raised its gasoline subsidy by 5 yen to 15 yen per liter on Thursday as a temporary measure to curb prices and ease the burden on households ahead of its planned scrapping of the existing provisional fuel tax at the end of the year.

Prime Minister Sanae Takaichi's government is set to increase its subsidy every two weeks, reaching about 25 yen on Dec. 11, when it will effectively cancel out the provisional tax, the energy agency said.

With the help of the bridging subsidy, the national average gasoline price of 173.50 yen per liter as of Monday is expected to fall to a four-year low of around 160 yen by late December, if market conditions remain stable.

In late October, Takaichi's Liberal Democratic Party agreed with opposition parties to remove the provisional tax rate of 25.10 yen per liter on Dec 31. The temporary tax was imposed in 1974 on top of the base tax rate, which currently sits at 28.70 yen, and was used for funding public works.

The end of the temporary gasoline tax is projected to reduce Japan's nationwide core consumer price index, excluding volatile fresh food, by 0.2 percentage point, according to Yoshiki Shinke, senior executive economist at the Dai-ichi Life Research Institute.

In an effort to alleviate pressure on household budgets caused in part by rising crude oil prices and the yen's weakness, the government introduced the gasoline subsidy program in January 2022, with it currently offsetting 10 yen per liter from the price.

In total, the subsidy cost more than 8 trillion yen over the four-year period.
The government also began expanding the diesel subsidy in steps on Thursday, ahead of a plan to end the provisional diesel tax of around 17 yen per liter on April 1.

Although the ruling and opposition parties have agreed to abolish the energy taxes, they have yet to reach a consensus on how to make up the estimated 1.5 trillion yen revenue reduction it will cause for the central and local governments.