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Japan more than triples fuel subsidies over March 10-16


Subsidy payment rises to Yen 17.7/liter on the week, from Yen 5.0/liter

Subsidy payments could reach upper limit of Yen 25/liter after March 17: sources

  • Author
  • Hiroyuki Koshoji
  • Editor
  • Ankit Ajmera
  • Commodity
  • Oil

The Japanese government more than tripled fuel subsidies to Yen 17.7, or 15 cents, per liter over March 10-16, from Yen 5/liter a week ago, in a bid to curb rising oil products retail prices.

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The government raised the upper limit of the subsidies to Yen 25/liter March 10, from Yen 5/liter earlier, as crude oil prices soared amid the Russia-Ukraine war. The subsidy payments could reach the upper limit of Yen 25/liter after March 17 if crude oil prices continue to rise, market source said.

The Oil Information Center said March 9 that the national average retail price for regular gasoline increased for the ninth straight week, rising Yen 1.8/liter week on week to Yen 174.6/liter ($1.51/liter) March 7.

Kerosene retail prices were up Yen 1.5/liter at Yen 114.4/liter, while gasoil retail prices rose Yen 1.7/liter to Yen 154.2/liter, also increasing for the ninth consecutive week.

"Considering the recent rise in crude oil prices, the national average gasoline price March 7 was predicted to be Yen 180.7/liter, but the increase of Yen 6.1/liter was suppressed to Yen 174.6/liter by the launch of the emergency mitigation measure," the Ministry of Economy, Trade and Industry said March 9.

The government started providing subsidies, which cover gasoline, kerosene, gasoil and fuel oil, to refiners and oil product importers from Jan. 27, as part of its efforts to alleviate the effect of rising oil prices on economic recovery from the pandemic.

The subsidies were initially introduced until end-March, but the Russia-Ukraine war has led the government to consider a possible extension, market sources said.

The subsidy was initially set at Yen 3.4/liter and paid until Feb. 2. The government reviews the subsidy amount weekly based on crude oil price movements. It raised the subsidy to a maximum Yen 5/liter over Feb. 10-March 9.

The government set a new goal March 4 to keep the retail gasoline price at Yen 172/liter after March 10, up from its prior target of Yen 170/liter.

"Considering the rise in crude oil prices, the subsidy payments will reach the upper limit of Yen 25/liter after March 17," a trader based in Osaka said. "However, it is unclear if the rise in retail prices would be curbed as the government expected."

Refiners use the government's subsidies to curb increases in weekly wholesale prices of gasoline, kerosene, gasoil, and fuel oil, while trading houses deduct subsidies from the selling prices of imported oil products.