Japan plans to introduce a supplementary budget to address price surges caused by the turmoil in the Middle East.

In response to the price surge caused by the ongoing turmoil in the Middle East, the Japanese government plans to launch a supplementary budget of approximately 3 trillion yen (about S$24.1 billion) to subsidize electricity and fuel costs such as gas for the public. The authorities will also continue to allocate funds to stabilize rising gasoline prices.

Japanese Prime Minister Sanae Takaichi, who previously believed that an additional budget was unnecessary, recently announced that she would consider it. She stated at a government-ruling party liaison meeting on Thursday (May 21) that she had instructed officials to draft a supplementary budget. Takaichi also pledged to provide support for electricity and gas price subsidies during the summer, given the rising prices of crude oil and liquefied natural gas amidst the turmoil in the Middle East.

Japan's hot summer months (July to September) will increase electricity consumption as residents use air conditioning. Five poverty alleviation groups held a press conference to request financial assistance from the Takashimakazu City government. These groups pointed out that in addition to rising prices due to the Middle East situation, increased electricity bills during the summer holidays due to increased air conditioning use, and the fact that schools do not provide lunch, will further burden families with children.

As global warming intensifies, the Japanese government has been intermittently providing subsidies for electricity and natural gas during the summer months since 2023. Last July to September, the subsidy amounted to 2 to 2.4 yen per kilowatt. This year, the authorities plan to allocate 500 billion yen as electricity subsidies starting in July. The report indicates that for a typical household consuming 400 kilowatts of electricity per month, this government subsidy will save them more than 1,000 yen.

Regarding gasoline subsidies, the Japanese government has been allocating 400-500 billion yen per month since March to keep the average price of gasoline around 170 yen per liter. Given that the budget will run out by the end of June, Takashi City is considering introducing a supplementary budget this month.

However, the Japanese government is beginning to feel the financial pressure from repeatedly using subsidies to deal with the Middle East crisis. Takayuki Kobayashi, chairman of the Liberal Democratic Party's Policy Research Association, stated, "Maintaining the current level of gasoline subsidies is unrealistic; it is necessary to consider reductions."

Nikkei points out that the authorities are highly likely to make up for the shortfall by issuing deficit bonds. However, if the government becomes heavily reliant on deficit bond financing, concerns about deteriorating public finances will intensify, which could further push up interest rates.

Finance Minister Satsuki Katayama stated after a cabinet meeting on the 22nd, "Considering the situation in Iran, regarding the supplementary budget proposal for fiscal year 2026, we hope to adopt measures that do not rely on the issuance of additional deficit bonds." She also indicated that she would secure funding sources to avoid triggering widespread public concern about public finances.

Source: [Lianhe Zaobao] (https://www.zaobao.com/news/world/story20260522-9093026)