During recent discussions in the Diet, Prime Minister Sanae Takaichi emphasized her commitment to minimizing the issuance of deficit-covering government bonds for a supplementary budget aimed at counteracting the economic repercussions of the ongoing Middle East conflict. “We must prevent any worst-case scenarios from endangering the livelihoods of our people or disrupting economic activities,” Takaichi asserted on May 20. While acknowledging the need for additional fiscal measures, she noted that the specifics and scale of the supplementary budget for fiscal 2026 remain under consideration. The prime minister pointed out that surplus funds from the fiscal settlement and other resources would soon be available, potentially easing the financial burden.
The prime minister’s stance has evolved, as she had previously dismissed the necessity of an extra budget during earlier deliberations. However, at a government-ruling coalition meeting on May 18, Takaichi revealed that she had directed Finance Minister Satsuki Katayama to explore options for a supplementary budget. Opposition leader Junya Ogawa of the Centrist Reform Alliance criticized her for potentially acting too late, but Takaichi rejected these claims, asserting that her directives were timely. Discrepancies in her statements were highlighted during a debate with Yuichiro Tamaki of the Democratic Party for the People, where Takaichi clarified that working-level officials had been instructed to consider the budget before the Golden Week holidays.
Addressing concerns over high crude oil prices, the government is providing substantial subsidies to maintain gasoline prices at around 170 yen per liter. Tamaki urged for these subsidies to be included in the supplementary budget, with a gradual exit strategy. Takaichi expressed her openness to increasing subsidy payments, acknowledging the need for a strategic approach. Meanwhile, industries are adapting to potential naphtha supply shortages due to the partial closure of the Strait of Hormuz. Calbee Inc., a snack food manufacturer, announced a shift in packaging for several products due to unstable naphtha-derived ink supplies, though the government maintains that overall naphtha volumes are adequate.
Prime Minister Takaichi addressed the supply-chain issues rather than a naphtha shortage itself as the root cause of current bottlenecks, committing the government to resolve these challenges under the leadership of Industry Minister Ryosei Akazawa. Additionally, Takaichi reiterated her intention to propose legislation to eliminate the consumption tax on food items, contingent upon an upcoming interim report from the national council on social security expected before the summer.