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Japan's budget for gasoline subsidies may run out in a month and a half

  • Takahide KiuchiPortraits of

    Takahide Kiuchi

    Executive Economist

Gasoline subsidy amounted to ¥42.6 per liter in week of May 14

On May 13, the Japanese government announced that its gasoline subsidy aimed at curbing surging fuel prices would be set at ¥42.6 per liter for the week starting May 14, reflecting the rise in global crude oil prices. This marks the first time the subsidy has exceeded the ¥40 threshold since the week of April 9, when it stood at ¥48.8 per liter.

Subsidy for week starting...
Mar 19:  ¥30.2/liter
Mar 26:  ¥48.1/liter
Apr  2:  ¥49.8/liter
Apr  9:  ¥48.8/liter
Apr 16:  ¥35.5/liter
Apr 23:  ¥30.9/liter
Apr 30:  ¥39.7/liter
May  7:  ¥39.7/liter
May 14:  ¥42.6/liter

Baseline scenario: Budget for gasoline subsidies will run out on June 29

​We considered three scenarios: one in which the subsidy remains at the current level of ¥42.6 per liter ("baseline scenario"), one in which a ¥50 per liter subsidy is in effect from May 21 onward ("pessimistic scenario"), and one in which a ¥20 per liter subsidy is in effect from May 21 onward ("optimistic scenario").

Under the baseline scenario, we estimate the funds earmarked for gasoline subsidies will be exhausted on June 26, slightly earlier than the June 29 date calculated one week ago. The current budget would run out on June 20 under the pessimistic scenario, while under the optimistic scenario it would last until August 7 (Figure). In other words, less than three months remain before the budget is depleted in the optimistic scenario, with only about a month and a half left under both the bearish and baseline scenarios.
 
Figure  Estimated time remaining before gasoline subsidy budget is exhausted

Profile

  • Takahide KiuchiPortraits of

    Takahide Kiuchi

    Executive Economist

    

    Takahide Kiuchi started his career as an economist in 1987, as he joined Nomura Research Institute. His first assignment was research and forecast of Japanese economy. In 1990, he joined Nomura Research Institute Deutschland as an economist of German and European economy. In 1996, he started covering US economy in New York Office. He transferred to Nomura Securities in 2004, and four years later, he was assigned to Head of Economic Research Department and Chief Economist in 2007. He was in charge of Japanese Economy in Global Research Team. In 2012, He was nominated by Cabinet and approved by Diet as Member of the Policy Board, the committee of the highest decision making in Bank of Japan. He implemented decisions on the Bank’s important policies and operations including monetary policy for five years.

    Profile

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