Japan to Scrutinize Gasoline Tax Cuts as Demand Uncertainty Looms

Japan's ruling coalition and a key opposition party have agreed on a plan to abolish the provisional gasoline tax rate. This move, aimed at gaining opposition support for the 2024 provisional budget, may boost fuel demand. However, demand increases remain uncertain due to various economic factors and changing demographics.

In a strategic political move, Japan's ruling Liberal Democratic Party (LDP) and its coalition partner Komeito have partnered with the Democratic Party for the People (DPP) to abolish the provisional rate on the gasoline tax, potentially stimulating fuel demand.

This agreement was critical in securing the DPP's support for Japan's 2024 provisional budget amid a fragile minority government led by Prime Minister Shigeru Ishiba. Having lost their parliamentary majority, the LDP-Komeito coalition is now courting smaller opposition parties to push their policy agenda forward.

Industry experts note that while lower taxes could increase gasoline demand, the impact remains uncertain due to factors like energy conservation efforts and demographic shifts. Gasoline prices in Japan face multiple taxes, making the potential effect of abolishing the provisional rate difficult to predict.

(With inputs from agencies.)