Japan to introduce new subsidy policy to lower gasoline, gasoil prices by Yen 10/liter

The Japanese government announced April 22 that it will change the current fuel subsidy policy introduced in January 2022 and provide a fixed subsidy starting May 22, as part of its response to the US tariff measures amid concerns over rising costs of living.

Subsidies for electricity and gas will also resume from July to September as a measure against the summer heat wave, Prime Minister Shigeru Ishiba said in a statement.

Ishiba said the government will introduce a new subsidy policy to cut gasoline and gasoil prices by Yen 10/liter, kerosene and fuel oil by Yen 5/liter and jet fuel by 4/liter, starting May 22. However, he did not specify when this program would end.

To avoid sudden price fluctuations and disruption of distribution when transitioning from the current system of weekly fluctuations in subsidy payments to a fixed amount of support, the government plans to adjust the subsidy amount to a maximum of Yen 5/liter for the first week.

The government will provide electricity and gas price support from July to September when electricity usage increases, Ishiba added. Regarding the subsidy amount, the prime minister said it would be decided in May after assessing future trends in fuel prices and electricity rates.

In Japan, the House of Councilors election is scheduled for the summer of 2025, and the ruling party has expressed the need to devise a strong price hike countermeasure that the public is demanding.

The government launched the subsidy program for gasoline, kerosene, gasoil and fuel oil to mitigate the impact of high oil prices on the economy as it recovered from the pandemic. In April 2022, the program expanded to include jet fuel and LPG.

The subsidy amount fluctuates weekly, considering the crude oil and gasoline retail prices.

It also began subsidizing electricity and gas prices in January 2023 in response to soaring fuel prices following Russia's invasion of Ukraine and ended in May 2024. However, the government was subsequently resumed twice, once for August-October 2012 and again for January-March 2025, as a measure against high prices.

US President Donald Trump paused country-specific reciprocal tariffs, including a 24% tariff on Japan, for 90 days on April 9, less than a day after they went into effect, while leaving a broad 10% tariff in place.

The US' 25% tariff on automobiles separately took effect on April 3.

The US was Japan's largest export market in 2024, with exports valued at Yen 21.295 trillion ($149.32 billion), according to data from the Ministry of Finance. Motor vehicles accounted for Yen 6.026 trillion, or 28.3%, marking the largest share of the country's total exports, MOF data showed.

Japan is in the middle of a high-level discussion with the US on its tariff measures, with the second round of negotiations scheduled by the end of April after having initiated the talks earlier in the month in Washington.

The national average retail price for regular gasoline fell Yen 1.40/liter week over week to Yen 185.10/liter ($1.3/liter) April 21, according to the Oil Information Center of the Institute of Energy Economics, Japan.