TOKYO, May 18 (Xinhua) -- Japanese Prime Minister Sanae Takaichi said Monday her government may compile a supplementary budget for fiscal 2026 to cushion the impact of soaring crude oil prices amid ongoing tensions in the Middle East, local media reported.
Takaichi said she has instructed Finance Minister Satsuki Katayama to consider drawing up an extra budget to continue gasoline subsidies and support households facing higher gas and utility bills this summer.
"We will make decisions appropriately and respond timely as needed so that economic activities and people's lives are not disrupted" due to the Middle East situation, Takaichi told a liaison meeting of the government and the ruling parties at her office, according to Kyodo News.
To mitigate the impact of rising crude oil prices, the Japanese government has earmarked over 1 trillion yen (around 6.29 billion U.S. dollars) for gasoline subsidies that were reinstated in mid-March, partly through the use of reserve funds in the fiscal 2025 budget.
However, some analysts said the funds could run dry by the end of June, as the government is expected to spend hundreds of billions of yen each month to keep retail gasoline prices at around 170 yen per liter.
The government could draw on reserve funds totaling 1 trillion yen in the fiscal 2026 budget to finance economic relief measures, but the amount could fall short, and critics argue the funds should be reserved for emergencies, such as natural disasters.
Supplementary budgets in Japan are usually compiled later in the fiscal year, often in the fall.
The early push for an additional budget comes as yields on the benchmark 10-year Japanese government bond have continued to climb amid persistent investor concerns over the country's fiscal sustainability under the Takaichi administration.
Higher borrowing costs risk adding to Japan's debt-servicing burden. According to the International Monetary Fund, Japan's debt was estimated at 204.4 percent of its gross domestic product, the worst ratio among the Group of Seven economies.
The scale of the supplementary budget is also drawing heightened scrutiny amid concerns over Japan's already strained public finances, following the enactment of a record 122.31 trillion yen spending plan for the fiscal year starting in April. (1 Japanese yen equals about 0.0063 U.S. dollar) ■