Japan's Cabinet approved a draft supplementary budget of 3.11 trillion yen (about 19.5 billion U.S. dollars) on Wednesday to cope with the effects of higher energy prices amid the ongoing conflict in the Middle East.
The bill is expected to secure parliamentary approval as early as Friday, while the need for an extra budget just over two months into the current fiscal year, which began in April, has reignited concerns about the country's deteriorating fiscal health and accelerating inflation.
The supplementary budget will create a reserve fund of 2.5 trillion yen to respond to soaring energy prices and other effects of the situation in the Middle East, primarily by replenishing funding for gasoline subsidies.
Since March, to counter Middle East-driven inflation pressures, the government has been providing subsidies to oil wholesalers to cap retail gasoline prices at around 170 yen per liter, financing them with some 800 billion yen taken from its fiscal 2025 reserve fund.
The existing fund for gasoline subsidies could run out in the coming months if it is used at the current pace. The balance stood at 670 billion yen at the end of May, after 310 billion yen was disbursed in April alone, according to the finance ministry.
The additional spending includes 513.5 billion yen for subsidies from July to September to help households pay for rising energy costs this summer.
The extra budget also sets aside 100 billion yen that regional municipalities can use on their own, such as subsidies for households using liquefied petroleum gas and for businesses using extra-high voltage electricity.
Japan relies heavily on the Middle East for crude oil imports. Following the launch of U.S.-Israeli strikes on Iran in late February and the effective closure of the Strait of Hormuz, both the ruling and opposition parties had called on the government to compile an additional budget to fight rising crude oil prices.
Japanese cabinet passes 3.1 trln yen extra budget
Japanese cabinet passes 3.1 trln yen extra budget
