Global Economy & Policy Insight Weekly

Research evidence excerpt

Global Economy & Policy Insight Weekly

h the long-standing provisional gasoline

tax in December 2025, and then reinstated this year on 19 March in response to soaring

crude oil prices. To date, the government has allocated ¥8,966.8bn for gasoline

subsidies.

Prime Minister Takaichi also appears to be leaning toward a revision of the government’s

gasoline subsidies. When asked about the subsidies at a House of Representatives

session on 3 June, Ms Takaichi said her administration would flexibly consider the

subsidy program, including the subsidized gasoline price. This comment was generally

considered a clear indication that the administration intends to revise the gasoline

subsidy in the near future.

Ms Takaichi previously expressed a negative stance on supplementary budgets, saying

that all necessary funding should be included in the government’s initial annual budget.

While tensions in the Middle East evidently made preparation of a supplementary budget

unavoidable, it is thought that Takaichi’s administration will seek to avoid the formation of

the usual autumn supplementary budget.

In that case, the Takaichi administration will likely need to drastically revise the gasoline

subsidy program, including halving the subsidy as per my calculation above, in order to

secure funding through to the end of the current fiscal year.

Revision of gasoline subsidies should be accompanied by a comprehensive

review of all government policies responding to the situation in the Middle East

To gain public understanding for such a revision, the government will need to provide a

positive explanation that the subsidy reduction is not intended to merely reduce

government spending but to also encourage people to reduce their gasoline