The Japanese government plans to allocate more than 3 trillion yen, or about 19 billion U.S. dollars, as a supplementary budget for the 2026 fiscal year.
Of this amount, around 500 billion yen drawn from the reserve fund will be used to help households pay their electricity bills, especially during the summer when demand for air conditioning rises sharply.
Previously, Japan had restored fuel subsidies and continued to spend hundreds of billions of yen each month to maintain the stability of fuel prices, due to higher oil prices resulting from tensions in the Middle East and disruptions to maritime traffic in the Strait of Hormuz.
However, these measures raise concerns about the burden of public debt and long-term financial pressures facing the world’s third-largest economy.
Regarding the fiscal plan, Japanese Prime Minister Sanae Takaichi said that the budget would be reinforced by issuing additional government bonds. She, however, stated that the total debt level would not exceed initial projections.
Indeed, thanks to a strong growth in tax revenue, the government was able to reduce the amount of bond issuances to a level equivalent to what had been planned for 2025. This explanation was aimed at reassuring the markets, as yields on Japanese government bonds have reached their highest level in 30 years due to concerns about inflation and public debt.
Although Japan heavily depends on oil supplies from the Middle East via the Strait of Hormuz, the prime minister stated that diversification efforts have enabled imports to reach about 80% of the level of the same period last year, which is sufficient to ensure supply through spring 2027.
Takaichi notably stated that she would not ask the public to restrict energy consumption in order not to hamper economic activity. At the same time, the government also plans to adjust fuel subsidies to keep pump prices around 170 yen per liter, in order to strike a balance between supporting users and reducing pressures on public finances.
