Japan is considering reducing subsidies on petrol from December as the cost of supporting retail fuel prices puts increasing pressure on government finances.
Reuters reported, citing unnamed ruling-party sources, that the proposed reduction could raise the national average petrol price to around $1.11 per litre in December and $1.15 per litre in January, from the current target of $1.09 per litre.
The subsidy programme was introduced in March following the outbreak of war in the Middle East, with the government seeking to shield households and businesses from rising international energy prices.
However, the financial burden has continued to grow, with the payments costing the government several billion dollars monthly, according to the report.
Japan is now considering scaling back the intervention as funding from an additional budget approved in May, worth approximately $19bn, comes under pressure.
The review comes as the continuing conflict involving the United States, Israel and Iran disrupts energy markets and threatens supplies from the Middle East.
Japan is particularly exposed to these disruptions because it relies heavily on imported energy to meet domestic demand. A significant share of its supplies comes from the Persian Gulf, making alternative sources difficult to secure when regional trade routes and production are affected.
Alongside the proposed subsidy reduction, the government is considering cutting the consumption tax on food and beverages from April 2027 to ease the financial pressure on households.
One ruling-party official told Reuters that the planned tax relief could help households absorb the impact of higher petrol prices, adding that the government wanted to reduce fuel subsidies as much as possible before the tax cut takes effect.
The proposed changes reflect the challenge facing Japanese authorities as they attempt to balance consumer protection with the rising cost of energy support.
A final decision on the timing and scale of the subsidy reduction had not been announced in the report.
