The Japanese government has approved a supplementary budget of 3.113 trillion yen, roughly $19.5 billion, to alleviate the burden of soaring energy costs due to the ongoing instability in the Middle East. A significant portion of this budget, amounting to 2.5 trillion yen, is earmarked for establishing a new reserve fund specifically aimed at mitigating the economic challenges posed by rising energy prices.
In addition to the newly created reserve fund, the budget allocates 513.5 billion yen to replenish an existing reserve fund. This allocation will enable the government to continue its efforts in subsidizing household electricity and gas bills, ensuring support through the months of July to September. Furthermore, the budget includes 100 billion yen in grants designated for local governments, which may utilize these funds at their discretion for various support measures. Notably, these measures could include subsidies for propane gas, a crucial energy source in rural areas.
The supplementary budget is set to be financed through the issuance of previously unissued deficit-covering bonds, a move facilitated by stronger-than-anticipated tax revenues expected in fiscal 2025. Despite this financial maneuvering, the new spending plan is projected to shift the fiscal balance into a deficit, overturning earlier forecasts of achieving a primary budget surplus.
Prime Minister Sanae Takaichi has emphasized that the government remains committed to achieving fiscal balance over the long term, rather than focusing on securing a surplus within a single fiscal year. The budget is anticipated to secure parliamentary approval later this week, marking a critical step in Japan’s efforts to navigate the economic repercussions of global energy market fluctuations.