Prime Minister Sanae Takaichi said Monday her government will consider compiling a supplementary budget for fiscal 2026 amid concern over the impact of elevated crude oil prices stemming from the Middle East conflict.
The government has been providing subsidies to oil wholesalers since mid-March to curb surging gasoline prices, tapping reserve funds in the fiscal 2025 budget, but it fears the financing will run out. More funds will likely be required if it decides to resume support for gas and utility bills to households this summer.
The size of the extra budget has come under scrutiny amid ongoing concerns about Japan’s fiscal health, which is the worst among the Group of Seven economies. Takaichi is pushing for expansionary spending to spur economic growth.
The government could tap reserve funds totaling 1 trillion yen ($6.3 billion) in the fiscal 2026 budget for economic measures, but the amount could fall short, while critics argue the funds should be reserved for emergencies such as natural disasters.
Usually, the government crafts a supplementary budget in the fall of the fiscal year or later.
The government set aside over 1 trillion yen for gasoline price subsidies, including reserve funds in the fiscal 2025 budget. But the amount fell to around 980 billion yen by the end of April.
Each month, hundreds of billions of yen are expected to be disbursed to keep pump prices at around 170 yen per liter. However, some economists estimate that these funds will run out by the end of June.
The government is considering resuming subsidies for electricity and gas bills for households between July and September, when demand for air conditioning increases.
Utility bill aid has continued intermittently since Russia’s full-scale invasion of Ukraine in 2022, which also resulted in increased crude oil prices.
But the subsidies are costly. From January to March, the government used 529.6 billion yen from the supplemental budget for fiscal year 2025 to reduce household bills by around 7,000 yen.
Takaichi told a Diet committee earlier this month that she does not see the immediate need to compile a supplementary budget, though she noted the government will closely monitor price movements to respond flexibly.
© KYODO
