Japan to end oil product subsidy in September

Japan's trade and industry ministry (Meti) will end its oil product subsidy at the end of September, in consideration of recent crude oil prices.

Meti announced on 26 May that it will reduce the subsidy from June onwards until September, when it will be terminated at the end of that month, as crude values have fallen to the same levels when the measure was implemented in November 2021. Meti will cut the funding amount by 10pc every two weeks. But this decision may change depending on crude prices, Meti added.

Meti started providing the subsidy in January 2022 when gasoline retail prices exceeded ¥170/litre, with maximum funding of ¥5/l for gasoline, gasoil, kerosine and heavy fuel oil, as an emergency measure to avoid any negative impacts on domestic oil product prices resulting from surging crude oil values. But the end date for the subsidy had remained unclear even after crude prices fell.

The maximum funding was raised to ¥25/l in March 2022, and to ¥35/l in April 2022. It was subsequently cut by ¥2/l each month during January-May this year, from ¥35/l to ¥25/l. Jet fuel is also supported by the measure, but the subsidy calculations differ from other products.

It is likely that the impact on the domestic oil product market will be limited if the government decides to terminate the measure as the funding under this scheme has been shrinking, Shunichi Kito, chairman of oil industry lobby group the Petroleum Association of Japan, said on 25 May.

The highest funding amount was ¥41.40/l during 16-22 June last year, but this dropped below ¥20/l from 1-7 December. The latest amount was set on 24 May at ¥11.10/l during 25-31 May.

By Maiko Nakashima