The Japanese government is set to launch its largest-ever fuel subsidy to date as national gasoline prices hit a record 190.8 yen per liter. As of March 16, the price has jumped 29 yen in a single week, breaking the previous record of 186.5 yen. This historic spike is a direct consequence of the escalating conflict in Iran and the resulting disruption to global crude supplies.
To prevent the price from exceeding 200 yen, the state will provide 30.2 yen per liter in subsidies to oil wholesalers starting March 19. This intervention is expected to eventually bring retail prices down to the 170-yen range. However, the Ministry of Economy, Trade and Industry expects a transition period of up to two weeks as stations clear their existing, expensive stock.
The root of the crisis lies in the spike of WTI crude futures to $119 per barrel following military actions against Iran. This volatility has forced wholesalers to raise their rates by 26 yen per liter to cover their own increased costs. Before the war, prices had been relatively stable at 155 yen per liter for several months.
This move by the government marks a significant return to aggressive market intervention. By capping the price at the wholesale level, Japan hopes to minimize the inflationary impact on its domestic economy. The situation remains fluid as global markets continue to monitor the military situation in the Middle East.