Japan’s ruling party will call for a beefed-up extension of gasoline subsidies until year-end to ease the hit from inflation on households, according to a draft of proposals seen by Bloomberg News on Wednesday.
(Bloomberg) — Japan’s ruling party will call for a beefed-up extension of gasoline subsidies until year-end to ease the hit from inflation on households, according to a draft of proposals seen by Bloomberg News on Wednesday.
The price of gasoline rose to a record high of 185.6 yen 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 can really feel a reduced burden.
The fuel subsidies first introduced by Prime Minister Fumio Kishida’s government in January 2022 are currently set to expire at the end of September. With his popularity languishing near lows since he took office, Kishida called for the subsidy proposals from his Liberal Democratic Party 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.
Kishida’s party is also set to recommend extending government subsidies to offset higher costs for electricity and gas until the economic measures take effect, according to the draft.
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.
The ruling party will review the calculation method in the subsidy program so that national average gasoline price doesn’t exceed 180 yen per liter, Nikkei reported on Monday. Support money will be provided until at least the year end, the report said.
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 and Shoko Oda.
(Updates with latest gasoline prices and details from Nikkei report)
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