TOKYO, Dec. 19 (Reuters) — Gasoline prices in Japan, currently around ¥175 per liter, are expected to rise by over ¥5 following the government’s decision to reduce subsidies to oil wholesalers.
Until now, Japan’s industry ministry had subsidized 60% of the cost of gasoline priced between ¥168 and ¥185 per liter. Starting Thursday, this subsidy will be reduced to 30%, and from January 16, the subsidy will end entirely for gasoline prices within that range. However, the government will continue to fully subsidize prices above ¥185 per liter.
As news of the subsidy cut spread, many drivers rushed to gas stations in anticipation of higher prices.
“There was a rush of customers until yesterday (Dec. 18),” said Daisuke Kanazawa, an employee at an Eneos gas station in Saitama. “But today (Dec. 19), although we’re seeing customers with corporate accounts, there have been very few private customers.”
Kanazawa added that the price of regular gasoline had increased to ¥183 per liter on December 19, up from ¥178 the previous day.
The gasoline subsidies were introduced in 2022 as Japan struggled with the economic effects of the COVID-19 pandemic and rising energy costs due to the war in Ukraine. These subsidies have been extended several times since then.
The government plans to phase out these subsidies as part of Japan’s broader effort to achieve carbon neutrality by 2050, a goal first announced in 2020.
“From the perspective of green transformation and decarbonization, we can’t continue the subsidies forever,” said former industry minister Ken Saito in June.
Experts predict further price increases in the coming weeks. “Gasoline prices could reach around ¥185 per liter by mid-January,” said Ryota Yasukawa, a researcher at Mizuho Information & Research Institute, on a recent television program.
Kanazawa expressed concern that higher prices could lead to reduced consumer demand. “There’s talk that prices will rise another ¥5 after the New Year, and if that happens, I fear customers will buy less gasoline and drive less,” he said.
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