Japan may expand fuel subsidy to curb energy costs-minister

TOKYO: Japan may expand a subsidy programme for gasoline and other fuels among measures under consideration to ease soaring energy costs, the industry minister said on Sunday.

The measure will be part of a fresh relief package which Japanese Prime Minister Fumio Kishida ordered his cabinet last Tuesday to put together by the end of April to cushion the economic blow from rising fuel and raw material prices.

“We are concerned that the weak yen, on top of escalated prices of oil and natural gas amid the Ukraine crisis, is having a negative impact on business activities and people’s daily life,” Economy, Trade and Industry Minister Koichi Hagiuda told a talk show by public broadcaster NHK.

To cushion the blow from higher fuel prices, the ministry may expand the subsidy scheme by lowering the base price and raising the payment ceiling, or combine the subsidy scheme with lifting a freeze on tax trigger clauses, Hagiuda said.

Japan implemented a temporary subsidy programme in January to mitigate a sharp rise in gasoline and other fuel prices after tight global supplies increased oil prices, with the Russian invasion of Ukraine causing a further spike in oil prices.

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The ceiling on the subsidy was raised fivefold to 25 yen (20 cents) a litre in March and the programme was recently extended till April-end from an earlier plan of March-end.

Hagiuda said the existing subsidy could be combined with the reintroduction of a “trigger clause” designed to trim taxes on gasoline and diesel when gasoline prices stay above 160 yen a litre for three months in a row.

The clause was frozen to free up rebuilding funds after a 2011 earthquake and tsunami that caused nuclear meltdowns in Fukushima.

“We are analysing carefully what kind of synergies can be achieved by combining the two schemes,” Hagiuda said. “Freeing up the trigger clause will reduce tax revenues for local governments and cause various administrative tasks such as budget rearrangement.

We will have to consider how to cover such negative effects,“ he added.

Hagiuda also reiterated Japan will not exit the Sakhalin-1 and Sakhalin-2 oil and gas projects in Russia, but the resource-poor country will aim to lower its reliance on Russian energy to be in line with its G7 allies.