Japan to subsidise oil distributors to mitigate sharp rise in fuel prices

FILE PHOTO: Japan's Education, Culture, Sports, Science and Technology Minister Koichi Hagiuda speaks at a news conference in Tokyo, Japan, September 16, 2020. REUTERS/Kim Kyung-Hoon

TOKYO (Reuters) - The Japanese industry ministry will implement a temporary emergency measure this week to mitigate a sharp rise in gasoline and other fuel prices by subsidising oil distributors to ease wholesale prices, its minister Koichi Hagiuda said on Tuesday.

The rare subsidies come as the nation's average retail gasoline price reached 170.2 yen ($1.5) per litre on Monday, the highest in more than 13 years and above the 170-yen threshold required to launch the subsidy scheme set by the ministry late last year.

Fuel prices have surged as crude oil prices soared to seven-year highs last week on concerns over tight global supply and potential supply disruption amid rising geopolitical tensions in Eastern Europe and the Middle East. [O/R]

A subsidy of 3.4 yen per litre, calculated by the ministry based on the average retail price, will be paid to oil distributors for a week starting Thursday to mitigate a sharp increase in their prices of gasoline, diesel, kerosene and fuel oil.

The ministry will set the subsidy amount every week if the gasoline price exceeds the threshold, which is designed to gradually increase.

"We hope this will limit the increase in the wholesale prices and help mitigate price rises in each region," Hagiuda told reporters.

"We will continue to look for ways to minimise the impact on people's lives," he said.

The measure is aimed at supporting the nation's economic recovery from the pandemic-induced slump, an official at the ministry said in November, adding that such a step has not been taken in the past.

The subsidies come just a few months after a U.N. climate deal called for an end to "inefficient fossil fuel subsidies".

($1 = 114.0000 yen)

(Reporting by Ritsuko Shimizu, Writing by Yuka Obayashi; Editing by Kirsten Donovan)

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