LDP proposes gradual reduction of fuel subsidies

The ruling Liberal Democratic Party on Monday compiled a proposal for the government to gradually cut subsidies for gasoline and other fuels.

The party said that the government should gradually reduce the subsidies mainly by raising the benchmark national average retail price of regular gasoline from around ¥170 per liter by about ¥5 a month starting in December. The subsidy currently amounts to about ¥43 per liter.

Concerns over the fiscal burden have led to calls for an exit strategy for the subsidy program. On Friday, Prime Minister Sanae Takaichi ordered industry minister Ryosei Akazawa to consider reviewing the system.

The proposal, which the LDP plans to submit to the government soon, stated that gasoline prices in Japan are lower than those in Europe and the United States and that the government should seek a smooth transition of the subsidy program to a sustainable one.

Meanwhile, the party called for the resumption of aid for electricity and gas bills, given higher energy demand in winter. The LDP also included measures to curb rising kerosene prices.

LDP policy chief Takayuki Kobayashi said at a party meeting on the situation in Iran, where the proposal was compiled: “The government has been spending over ¥10 billion a day on gasoline subsidies. It is time to revise the program while keeping a close eye on people’s livelihoods and economic activities.”

The government started providing gasoline subsidies in 2022 under the administration of then Prime Minister Fumio Kishida. Although the program was terminated at the end of last year, it was resumed in March this year following a surge in crude oil prices caused by the worsening situation in the Middle East.