Japan to temporarily hike fuel subsidies to smooth tax cut impact
Gasoline fuel guns are pictured in front of fuel boards at a gasoline station in Tokyo, Japan, on Sep 20, 2022. (Photo: REUTERS/Kim Kyung-Hoon)
TOKYO: Japan's industry ministry said on Friday (Nov 7) it will temporarily raise gasoline and diesel subsidies from next week in an attempt to smooth the impact of planned tax cuts on the fuels.
The country's ruling and opposition parties agreed this week to scrap the gasoline levy by Dec 31 and the tax on diesel by Apr 1 next year to ease the burden on households.
By temporarily raising subsidies on gasoline and diesel, the government hopes consumers will not be tempted to delay purchases before the tax cuts are implemented.
The move should also mean Japan avoids long queues at gas stations if there is a sharp overnight drop in prices.
While referred to as provisional, the tax on gasoline and diesel has been in place since the 1970s, when it was introduced as a temporary step to fund road building and maintenance.
The tax currently adds ¥25.1 (US$0.17) per litre to the base rate of ¥28.7 on gasoline and ¥17.1 to the base rate of ¥15.0 on diesel.
As part of efforts to ease the pain of rising inflation on households, Japan's government currently provides subsidies of ¥10 per litre for gasoline and diesel.
These will rise to ¥15 on Nov 13, ¥20 for gasoline and ¥17.1 for diesel on Nov 27 and to ¥25.1 for gasoline and ¥17.1 for diesel on Dec 11.
The subsidies will end when the fuel taxes are abolished.
While lower prices could spur demand, a ministry official said Japan's gasoline consumption has been falling by more than 2 per cent annually due to population decline and the wider use of hybrid vehicles, making a rebound unlikely.
