Japan Eyeing 3-T.-Yen Extra Budget to Tackle Middle East Fallout

Tokyo, May 21 (Jiji Press)–Japan’s government and ruling coalition plan to compile a fiscal 2026 supplementary budget worth around 3 trillion yen in preparation for a prolonged Middle East crisis, it was learned Thursday. The extra budget will be submitted to the Diet, or parliament, in early June. For envisaged subsidies for electricity and gas bills for this summer, about 500 billion yen will be sourced from existing reserve funds. The government hopes to quickly ease households’ burdens from rising energy prices. Since funds for gasoline subsidies may run out by the end of June, securing additional financial resources by building up reserve funds has become an urgent task in case the de facto blockade of the Strait of Hormuz continues. The ruling Liberal Democratic Party and its coalition partner, the Japan Innovation Party, are making coordination on the supplementary budget plan. Its scale and content may change depending on the course of the ruling bloc talks. As financial markets are increasingly wary of fiscal expansion, the government plans to limit measures in the add-on budget to the minimum necessary. Deficit-covering government bonds are expected to be issued to finance the supplementary budget. The government believes that the impact on financial markets will be curbed as it can reduce the issuance of earlier planned bonds thanks to economic growth. “We aim to ensure fiscal sustainability while sticking to the principle of maintaining market confidence,” Finance Minister Satsuki Katayama said in an address Thursday. The planned subsidies for lowering household electricity and gas bills will be provided to utilities, as was the case in the past. The government plans to use reserve funds under its initial fiscal 2026 budget for such aid for July-September so that the subsidies will be provided as early as possible. It hopes to make a cabinet decision on the move next week. END [Copyright The Jiji Press, Ltd.]