The Japanese government has authorized a supplementary budget totaling 3.113 trillion yen, approximately $19.5 billion, aimed at mitigating the impact of surging energy costs due to ongoing unrest in the Middle East. A significant portion of this budget, around 2.5 trillion yen, is earmarked for establishing a new reserve fund specifically to address the economic repercussions of increased energy prices. Additionally, 513.5 billion yen is designated to replenish an existing reserve fund, ensuring continued government subsidies for household electricity and gas bills from July through September.
Further support comes in the form of 100 billion yen in grants allocated to local governments. These funds are designed to be used at the discretion of local authorities, potentially covering support measures like subsidies for propane gas, which is extensively used in rural regions.
To finance this supplementary budget, the government plans to issue previously unissued deficit-covering bonds, a move enabled by stronger-than-expected tax revenues anticipated in fiscal 2025. However, officials acknowledge that this new spending package will likely push the fiscal balance into a deficit, overturning earlier projections of a primary budget surplus.
Prime Minister Sanae Takaichi has indicated that the government’s focus will be on achieving a fiscal balance over the long term, rather than striving for a surplus in a single fiscal year. The supplementary budget is anticipated to pass parliamentary approval later in the week, marking a significant step in the government’s response to rising energy costs.