Takaichi Outlines Next Steps for Emergency Price Relief Amid Middle East Tensions

Prime Minister Takaichi explained the next steps for emergency price relief measures in light of the situation in the Middle East. In response to calls from ruling and opposition parties for a phased review of fuel support and an exit strategy, she considered the form of support with Minister of Economy, Trade and Industry Akazawa, also taking into account proposals from the Liberal Democratic Party and the Japan Innovation Party.

The Prime Minister said that the Cabinet had made responses to rising prices its top priority, that Japan’s inflation rate was the lowest in the G7, and that real wage growth had been positive for nine consecutive months and was at the highest level in the G7. She also said that after tensions in the Middle East escalated, inflation rates in the United States, the euro area, and the United Kingdom exceeded 3% due to rising energy prices, while Japan’s rate was kept lower than those of other countries through measures to curb energy prices.

Electricity and gas support is expected to reduce costs for a standard household by about 7,000 yen over the three months from December through February.

The government said it would give due consideration to the effects on people’s lives and economic activity when smoothly transitioning fuel support to a sustainable system.

Ahead of the winter demand season, electricity and gas bill relief will be implemented again this season, with the start brought forward from January last time to December. Electricity support will be 1 yen per kWh in December, 4.5 yen in January, and 4.5 yen in February. Gas bills will also be covered. The government will consider its response from March onward in light of the climate, energy price trends, and other factors.

For kerosene, which is essential to daily life in regions with especially severe cold, measures to facilitate distribution will be strengthened, including financial support for high-priced imported kerosene, to prevent supply imbalances and distribution bottlenecks.

To secure sufficient funding for near-term gasoline support, the Prime Minister instructed officials to use the “Contingency Reserve for Responses to the Situation in the Middle East and Other Matters.” The current gasoline subsidy exceeds 50 yen per liter, its highest level since the measure began in January 2022. More than 10 billion yen in tax revenue is being used each day to curb prices, and cumulative spending from the fund has reached about 9.6 trillion yen since its launch, including about 1.4 trillion yen under the Takaichi Cabinet.

Regarding fuel subsidies, the government will basically raise the benchmark price by 5 yen each month from December toward early spring while monitoring crude oil prices. She said she would not prejudge the duration of the increases, the date when subsidies will end completely, or the price level at which subsidies might be considered. In international comparisons, she said Japan’s gasoline prices were less than half those in France and Germany and lower than those in the United States.

The Prime Minister said that year-end tax adjustments would deliver an income tax reduction of 30,000 to 60,000 yen per taxpayer. She also said that a reduction in the consumption tax rate on food and beverages from April is necessary, as food and beverage inflation remains particularly high compared with other countries. She explained that the tax cut is under deliberation in the Diet.