Japan PM says to maintain subsidies capping gasoline prices, tap reserves

Japanese Prime Minister Sanae Takaichi announced on Tuesday that the government will maintain subsidies to cap gasoline prices, in an effort to mitigate the impact of inflation on households amid the ongoing Middle East conflict. The subsidies, set to keep gasoline prices at approximately 170 yen ($1.06) per liter, have been put in place due to uncertainty surrounding crude oil price fluctuations.

Takaichi instructed officials to prepare necessary funding, including tapping into reserves of around 2.5 trillion yen, as part of a supplementary budget enacted in June. The crisis in the Middle East has put significant pressure on Japan's energy imports, as the Strait of Hormuz has been effectively closed due to the U.S. war on Iran.

Lawmakers from both ruling and opposition parties have called for a reevaluation of the subsidies, which come at a time when Japan is grappling with concerns over its fiscal health amidst expansionary measures. The government has already spent around 80% of the roughly 1.16 trillion yen in funding allocated for the subsidies as of the end of July.

Takaichi stated that the government will closely monitor the effects of the conflict and consider the provision and duration of the support measures on a flexible basis. The nationwide average retail gasoline price was reported at 169.80 yen per liter as of August 17, with the government currently paying subsidies of around 20 yen per liter to maintain prices at around 170 yen.