Japan’s government has greenlit a supplementary budget amounting to 3.113 trillion yen, or roughly $19.5 billion, aimed at mitigating the impact of escalating energy costs due to ongoing turmoil in the Middle East. The core of this financial package, 2.5 trillion yen, is earmarked for a new reserve fund specifically designed to tackle the economic challenges posed by increased energy prices.
In addition to the new reserve, the government plans to allocate 513.5 billion yen to bolster an existing fund. This will ensure continued subsidies for household electricity and gas bills from July through September, providing some relief to consumers during this period of elevated energy expenses.
The budget also sets aside 100 billion yen for grants to local governments, enabling them to deploy the funds at their discretion. These grants could support various initiatives, including subsidies for propane gas, which is especially prevalent in rural communities.
Financing for the supplementary budget will come from deficit-covering bonds, which the government can issue thanks to unexpectedly strong tax revenues projected for fiscal 2025. However, this move is anticipated to tip the fiscal balance into a deficit, overturning earlier forecasts of achieving a primary budget surplus. Prime Minister Sanae Takaichi has underscored that the government’s focus will be on maintaining fiscal health over the long term, rather than securing a surplus in a single fiscal year.
The proposed budget is slated for parliamentary approval later this week, marking a significant step in Japan’s efforts to address the economic strain caused by rising global energy prices.