Japan to raise gasoline price target as subsidy costs come under pressure

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Japan to raise gasoline price target as subsidy costs come under pressure — Japan to raise gas prices

Japan is preparing to lift its target retail gasoline price in stages from December through next spring as the government moves to curb fuel subsidy spending. The plan would raise the target by 5 yen per litre each month from the current level of around 170 yen per litre.

Highlights

Japan will raise its target gasoline price by 5 yen per litre each month from December, aiming to reduce government subsidies.
The current subsidy keeps retail gasoline at about 170 yen per litre, but phased increases indicate gradual rather than abrupt withdrawal of support.
The government is acting amid concerns that subsidy funding will run short, signaling Tokyo's intent to contain the fiscal burden of energy support.

Planned shift in fuel price policy

As reported by Reuters, Prime Minister Sanae Takaichi says on Thursday that the government plans to raise its target gasoline price at the pump by 5 yen per litre each month from December towards next spring, a move aimed at reducing subsidies.

The government has been providing oil refiners with subsidies to keep the retail gasoline price at around 170 yen per litre. The planned monthly increases indicate a gradual rollback of support rather than an abrupt end to the programme.

Budget implications for Japan's energy market

The adjustment comes amid growing concerns that funding for the costly measures could eventually run short. Reuters reported last week, citing ruling party officials, that the government was considering scaling back gasoline subsidies from as early as December.

For refiners, fuel retailers and consumers, the phased increase points to higher pump prices over the coming months if the policy proceeds as outlined. The change also signals a broader effort by Tokyo to contain the fiscal burden of prolonged energy support.

Our earlier article on the surge in oil shipping costs explained how conflict-related risks and rerouted tanker traffic have sharply increased freight and insurance expenses, making transport a much larger part of the delivered oil price. We noted that these higher logistics costs can quickly filter through to gasoline prices at the pump and broader consumer inflation, hitting import-dependent markets and squeezing refiners.

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