TOKYO: Japan’s industry ministry said Friday it will end at the end of September a program to provide subsidies to oil distributors to curb sharp rises in pump prices.

Crude oil prices, which soared in response to Russia’s invasion of Ukraine, have largely returned to levels before the introduction of the program, reflecting a decline in demand caused by the global economic slowdown.

The ministry plans to gradually cut the subsidies from June and put an end to the current 6.2-trillion-yen program, which covers not only gasoline but diesel fuel, heating oil, heavy oil and aircraft fuel, on Sept. 30.

But if crude oil prices spike again by the deadline, the ministry may seek a fresh budget allocation to continue to provide the subsidies, people familiar with the matter said.

Starting out as a temporary measure in January 2022, the program was initially supposed to run until the end of March. But the government extended the program and increased the assistance amount.

Currently, oil wholesalers and importers will receive subsidies with the 100 pct cover rate if the nationwide average pump prices exceed the government-set price ceiling of 168 yen per liter by up to 25 yen. In the case of a sharper price hike, the cover rate comes to 50 pct.

From June, the rate will be reduced by one-tenth every two weeks if the average retail price hikes beyond the ceiling are curbed to 25 yen or smaller. Meanwhile, if hikes are bigger, the 50 pct rate will be raised by five-hundredth every two weeks until the end of the current program.

JIJI Press