The government has formally announced a reduction in gasoline subsidies, which is expected to affect gasoline price trends from next month onward. As the subsidy reductions proceed, the price cap may be raised to ¥190 by March.
The government announced a reduction in gasoline subsidies. This is expected to create a situation in which prices excluding subsidies rise, and gasoline prices are expected to trend upward from December onward. At the prime minister's press conference, the basic proposal was to raise the price cap from the current ¥170 by ¥5 each month, reaching ¥190 in March, although the timing and scale of the increases will be determined based on circumstances.
From a market and fiscal-policy perspective, gasoline prices will be directly affected by the reduction in subsidies, even as they remain subject to short-term effects from yen appreciation or depreciation in line with developments in US-China political conditions and movements in the dollar-yen exchange rate. If prices excluding subsidies remain elevated, the trajectory of the price cap through February next year will be a key focus.
In past cases, gasoline prices after subsidy reductions have followed a trajectory similar to the cap, and both the government and the market have indicated that prices of around ¥185 may be a benchmark this time as well. However, the administration's cautious stance and the impact of the unified local elections mean that actual price levels could follow a different scenario.
This report discusses gasoline price levels and future policy management as the subsidy reductions proceed. The data have been processed depending on their source, and the views presented may be updated depending on future official announcements and additional data.