Japan readies extra budget for prolonged Middle East crisis
Funds would support summer power and gas relief, replenish gasoline subsidy resources and keep measures to what Tokyo sees as essential.
- Japan is preparing an extra budget of about 3 trillion yen for fiscal year 2026 in case the Middle East crisis becomes prolonged.
- The funds are intended to address rising energy costs, with planned measures including subsidies for household electricity, gas, and gasoline.
- The supplementary budget is expected to be submitted to the Diet in early June and will be financed by issuing deficit-covering government bonds.
Japan is moving to prepare an extra fiscal 2026 budget of about 3 trillion yen as the government and ruling bloc brace for the possibility that the Middle East crisis could drag on, it was learned on Thursday (May 21).
The package is expected to be sent to the Diet in early June, while the ruling Liberal Democratic Party and its coalition partner, the Japan Innovation Party, continue to coordinate the plan. Its final size and contents could still change depending on the course of those talks.
A more immediate step is planned for household energy bills. Around 500 billion yen for this summer’s electricity and gas subsidies is set to come from existing reserve funds, allowing the government to move quickly to ease the burden from rising energy prices.
The aid for July-September would use reserve funds included in the initial fiscal 2026 budget so that the discounts can be delivered as early as possible. As in earlier rounds, the subsidies designed to lower household electricity and gas charges would be paid to utilities. The government hopes to make a cabinet decision on the measure next week.
Gasoline support has become another pressing issue. Since funding for gasoline subsidies could be exhausted by the end of June, the government sees it as urgent to secure additional financial resources by building up reserves in case the de facto blockade of the Strait of Hormuz continues.
At the same time, officials are trying to limit concern in financial markets, where caution over fiscal expansion has been increasing. The supplementary budget is therefore expected to be restricted to the minimum measures considered necessary.
Deficit-covering government bonds are expected to be issued to finance the extra budget. The government believes the impact on financial markets can be contained because economic growth would allow it to reduce the issuance of bonds that had already been planned.
“We aim to ensure fiscal sustainability while sticking to the principle of maintaining market confidence,” Finance Minister Satsuki Katayama said in an address on Thursday.
[Copyright The Jiji Press, Ltd.]
