Japan’s government is set to decide to extend gasoline, natural gas and power subsidies to the end of March that were set to expire at the end of 2023, five government and ruling party sources with knowledge of the matter said this week.
The extension of the subsidies, which were previously extended to the end of 2023 in August, will be featured in an economic package Prime Minister Fumio Kishida’s cabinet plans to compile later this month, the sources said.
Kishida has urged his government to compile a supplementary budget to fund the package while the government tries to scrape together financial sources to fund it, raising concerns about adding to the industrial world’s heaviest debt pile.
Kishida is hoping the new economic package shores up flagging support for his cabinet.
Some ruling party lawmakers have called for an overall economic package worth around 15 trillion to 20 trillion yen ($100 billion-$134 billion), which may jeopardize the government’s aim of balancing the primary budget, excluding new bond sales and debt servicing costs, by the fiscal year-end in March 2026.
The subsidies for gasoline, electricity, and gas utilities were seen as urgent because the government wants to reduce the burden on Japanese firms to keep alive the momentum towards wage hikes at the annual labor talks in March, the sources said on condition of anonymity as they are not authorized to speak to media.
The government would decide later on whether to continue the subsidies beyond March, taking energy prices and currency moves into account, they said.
The government decided in August to extend the subsidies to the end of the year amid rising energy prices and as the yen weakened, which boosted the import costs of fuel for resource-deficient Japan.
The Prime Minister’s office did not immediately reply to a request for comment. — Reuters