TOKYO - The Japanese parliament on Friday enacted a 3.11 trillion yen ($19 billion) supplementary budget for this fiscal year to ease the impact of rising energy costs, with the bill for extra spending clearing both of its chambers in just two days after submission.
The extra budget, usually compiled much later in each fiscal year, came two months after the initial fiscal 2026 budget was passed in April. The initial fiscal spending plan did not include measures to tackle the impact of the Middle East conflict, stirring calls in both ruling and opposition parties to craft an extra budget.
The budget bill cleared the House of Councillors, where the ruling coalition does not have a majority, with support from some opposition parties. The House of Representatives passed the draft budget on Thursday.
Prime Minister Sanae Takaichi had initially denied the need for an extra budget, apparently mindful that additional issuance of debt-covering bonds to finance it could fuel concerns over a further deterioration in the country's fiscal health and push interest rates higher.
The prolonged Middle East conflict since the U.S.-Israeli attacks on Iran on Feb. 28 has kept crude oil prices elevated, disrupted supplies of oil and other petroleum products due to the effective closure of the Strait of Hormuz and added inflationary pressures on the resource-poor country.
Part of the budget will be used to replenish reserve funds for subsidies on gas and electricity bills during the July-September period. It also sets aside cash to curb gasoline prices by subsidizing oil wholesalers.
Takaichi said the extra budget, though funded entirely by deficit-covering bonds, can be executed without affecting the bond market. Due to higher-than-expected tax and nontax revenues and lower-than-expected expenditure, the government will forgo the issuance of around 3 trillion yen in bonds that had originally been planned to fund spending in fiscal 2025, which ended in March, officials said.
Still, the government's plan to continue providing subsidies to oil wholesalers to keep gasoline prices at around 170 yen per liter has stoked concerns about fiscal sustainability, as crude oil prices remain high.
The supplementary budget establishes a reserve fund of 2.5 trillion yen primarily for gasoline subsidies.
It sets aside 100 billion yen that municipalities can use at their discretion, such as subsidies for households using liquefied petroleum gas and businesses using extra-high voltage electricity.
Another 513.5 billion yen is allocated for electricity and gas subsidies from July to September, when demand for air conditioning increases.
