As gasoline prices in Japan hit a record 190.8 yen ($1.20) per liter, Prime Minister Sanae Takaichi has announced an emergency subsidy to protect the national economy. The price, reported as of March 16, represents a massive leap from the 155-yen average seen earlier this year. The government’s target is to use subsidies to bring the cost back down to approximately 170 yen per liter.
The crisis was sparked by the U.S.-Israeli conflict with Iran, which saw WTI crude futures surge to $119 per barrel. This volatility forced wholesalers to increase their prices by 26 yen per liter, an amount that was quickly passed on to consumers. With the Strait of Hormuz effectively blocked, the supply of crude to Japan has become both uncertain and expensive.
The new subsidy of 30.2 yen per liter will take effect on March 19. Wholesalers are expected to lower their prices immediately after receiving the government funds, but motorists won’t see the full benefit for up to two weeks. This delay is due to the “high-cost” inventory currently held by gas stations across the country.
This record price of 190.8 yen breaks the previous all-time high of 186.5 yen. The government is committed to ensuring the price does not exceed 200 yen, a figure that officials believe would have a major negative impact on consumer sentiment. Further measures may be considered if the conflict in the Middle East persists.