Japan Reviews Fuel Subsidies as 560 Billion Yen Fund Nears Depletion

Key Facts

Japanese Prime Minister Sanae Takaichi has ordered a review of fuel subsidies as the support fund faces the prospect of running out of resources soon. The fund held about 560 billion yen at the end of September, according to a report by The Japan Times citing Jiji Press. The report said the funds are likely to run out soon as crude oil prices rise. The review comes as the government seeks to contain fuel costs for households and businesses. Takaichi's directive did not specify whether she would reduce or end the subsidies.

The government has spent about 1.2 trillion yen on subsidies since restarting the program in March 2026, according to the same report. The program provides support to wholesale oil distributors to keep the average retail price of regular gasoline at about 170 yen per liter. That puts a direct price target at the center of the support mechanism, rather than providing subsidies directly to consumers. But the intervention's continuation depends on the fund's resources as crude oil costs rise. The review centers on how to continue or adjust the support as the fund nears depletion.

The subsidy review coincides with broader pressure on consumer prices in Japan. A Reuters report attributed higher fuel costs to the ongoing conflict in the Middle East and also cited higher import prices driven by a weaker yen. The report added that strong demand related to artificial intelligence is another source of price pressure. These factors place energy costs among a range of pressures facing the economy as the government considers the path for fuel subsidies. The report did not specify how much each factor contributed to the overall price increase.

The Bank of Japan's monetary policy committee is scheduled to meet on October 29 and 30, 2026. The bank will release its monetary policy statement and outlook for economic activity and prices on October 30, according to its official schedule. The meeting comes after the fuel subsidy review began, but is a separate date on the monetary policy calendar. The document is due to include the bank's economic outlook alongside its policy statement. The government's current step focuses on reviewing subsidies, while the bank has set the date for its meeting and outlook release at the end of the month.