Japan lifts gasoline subsidy fivefold after crude passes $100/b

Quantum Commodity Intelligence – Japan has upped the ceiling of its gasoline subsidy from JPY5 per litre to JPY25/litre ($0.22/litre) in a bid to stabilise retail prices after crude pushed through the $100/b level following Russia's invasion of Ukraine on Wednesday, according to Nikkei news.

"For the time being, we will suppress surging retail prices by greatly expanding and strengthening the mitigation program," Japanese Prime Minister Fumio Kishida said.

The subsidy was introduced at the end of January in an effort to maintain gasoline retail prices at JPY170/litre ($1.50/litre) to stem inflation in Japan.

Yet gasoline prices have risen for seven straight weeks since the inauguration of the subsidy and reached JPY172/litre last.

The level of the subsidy has been revised on a weekly basis – depending on retail price movements – and have been maxed out at their ­­­previous ceiling in early February, prompting calls by government officials to increase the maximum level.

Earlier calls to increase the ceiling were dismissed as the program would run out of the JPY89.3 billion ($775 million) penciled in for its budget until the end of March.

However, Japan has triggered a series of measures, including planning a release of crude barrels from its reserves, after global energy prices surged following Russia's invasion of Ukraine.

The scheme was introduced just two months after 200 countries – including Japan – signed the COP26 UN climate deal, which called for an end to "inefficient fossil fuel subsidies".