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Japan's government is taking steps to buffer its citizens from the repercussions of escalating global energy prices. Prime Minister Fumio Kishida announced on 23 October that the government would prolong subsidies for gasoline, gasoil, kerosene, and fuel oil into spring of the coming year. The aim of this initiative is to offer relief from the financial strain brought about by inflation, particularly as wages have not risen proportionally. Previously, in September, these subsidies had been set to last until December's end.

With winter around the corner, fuel consumption in Japan is anticipated to rise, as highlighted by the Minister of Trade and Industry, Yasutoshi Nishimura. He expressed concerns over the potential for gasoline prices to surge past ¥200/litre (equivalent to $212/bl) if the subsidies were not in place. However, with the government's assistance, prices have remained below ¥175/litre. Recent geopolitical events, like the Hamas-Israel conflict, combined with the decision by some OPEC+ nations to reduce oil production, have contributed to the uptrend in oil prices.

Yet, the implementation of these subsidies doesn't come without its challenges. Nishimura pointed out the urgency of creating an exit plan, considering the immense public expenditure associated with the subsidies. He further emphasized the need to restructure Japan's economy to be more resilient to energy crises in the future.

Defending the decision, the Ministry of Trade and Industry (Meti) clarified that these subsidies shouldn't be seen as promoting inefficient fossil fuel consumption. This stance is significant, especially when viewed in the context of the G20's commitment to progressively eliminate and streamline fossil fuel subsidies.

In the backdrop of the previous year's energy crisis, Japan, during its G7 presidency, continued its support for fossil fuel consumption. Meti has allocated a budget of ¥6.2 trillion for the period of January 2022 to December 2023 to counterbalance the effects of soaring oil product costs. Additionally, to combat inflation, ¥3.1 trillion has been earmarked to control increases in retail electricity and city gas prices for 2023.

On a global scale, fossil fuel subsidies reached an all-time high of over $1 trillion in 2022, as per the methodologies employed by the IMF and IEA. This surge has been attributed to the war in Ukraine, prompting various governments to implement measures to alleviate the financial strain of rising energy prices. Notably, the IEA found that a substantial chunk of these subsidies was centered in fossil fuel-exporting nations. The IMF even indicates that when factoring in implicit subsidies, the total amount jumps to an astounding $7 trillion.

According to the article by Procurement Resource, Japan's government is extending subsidies for fuel until spring 2023 to ease financial strain from rising energy prices, with concerns of gasoline hitting ¥200/litre. They acknowledge the need for an exit plan to manage high public expenditure and to build energy crisis resilience. Japan's move aligns with G20 goals to reduce fossil fuel subsidies, despite substantial funding allocation. Globally, fossil fuel subsidies reached over $1 trillion in 2022, partly due to the Ukraine conflict, and could total $7 trillion when implicit subsidies are considered.