Japan’s ruling party called for a beefed-up extension of gasoline subsidies until year-end to ease the hit from inflation on households, according to proposals seen by Bloomberg News on Wednesday.
(Bloomberg) — Japan’s ruling party called for a beefed-up extension of gasoline subsidies until year-end to ease the hit from inflation on households, according to proposals seen by Bloomberg News on Wednesday.
The price of gasoline rose to a record of ¥185.6 per liter even with existing subsidies, according to a statement from the trade ministry on Wednesday. The draft indicated that gasoline prices should come down to a level where consumers could feel a reduced burden.
“It’s impossible to keep prices down for ever, but a price of under ¥180 is the limit of what the people can bear,” Liberal Democratic Party policy chief Koichi Hagiuda told reporters after meeting Prime Minister Fumio Kishida.
Kishida later told reporters he would take new steps on gasoline prices from Sept. 7.
The fuel subsidies first introduced by Kishida’s government in January 2022 are currently set to expire at the end of September. With his popularity languishing near its lowest since he took office, Kishida called for the subsidy proposals from his LDP by the end of August and a discussion of further economic measures in September.
Some analysts say he may still be looking for an opportunity to call an election by the end of the year. Polls show price rises are a key issue voters want him to tackle.
Kishida’s LDP is also set to recommend extending government subsidies to offset higher costs for electricity and natural gas until the economic measures take effect, according to the document.
The government’s subsidies have so far been helping keep overall inflation levels down, a move that’s likely helped the Bank of Japan to argue that current price gains aren’t sustainable, and monetary easing is still needed.
If the government were to scrap subsidies for gasoline and kerosene, it could potentially push up Japan’s key inflation rate by 0.5 percentage point, according to Dai-ichi Life Institute economist Yoshiki Shinke. Subsidies for gas and electricity are also holding down overall inflation at the national level by an additional 0.99 percentage point, according to the internal affairs ministry.
–With assistance from Takashi Hirokawa, Shoko Oda and Jon Herskovitz.
(Updates with LDP official comment in third paragraph.)
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