Tokyo. In response to rising energy prices and economic pressure caused by ongoing tensions in the Middle East, the Japanese government has approved a preliminary draft of a supplementary budget worth 3.11 trillion yen (approximately 19.5 billion US dollars).
The Japanese Cabinet approved the budget on Wednesday. It is expected to be endorsed by parliament by Friday. The budget prioritizes energy price control, relief for consumers, and long-term energy security.
Under the new budget, a 2.5 trillion yen emergency fund will be established. The main objective of this fund is to reduce the impact of the sharp rise in energy prices and continue petroleum subsidy programs. Since March, the Japanese government has been providing subsidies to oil distributors in order to keep retail petrol prices capped at around 170 yen per litre.
Previously, around 800 billion yen had already been spent from the emergency fund allocated for fiscal year 2025. As the remaining balance is decreasing and is at risk of being exhausted in the near future, the government has introduced an additional budget.
Under the supplementary budget, 513.5 billion yen has been allocated to provide relief for households on energy expenses from July to September. In addition, 100 billion yen has been set aside so that local governments can use it according to their needs. This amount will be used to support consumers and businesses using liquefied petroleum gas (LPG) and high-voltage electricity.
Since Japan imports most of its crude oil from the Middle East, regional instability poses an increasing risk of directly affecting energy supply and prices. For this reason, pressure is mounting on the government to take further intervention measures in order to maintain price control and economic stability.
Analysts have stated that introducing an additional budget just two months into the current fiscal year is a sign of economic challenges and inflation-related concerns. They further noted that as government spending increases, pressure on public debt and fiscal management may also rise.
Meanwhile, the latest report published by the Organisation for Economic Co-operation and Development (OECD) projects that the global economy will grow at a slower pace in the coming years. According to the report, global economic growth is estimated to be 3.4 percent in 2025, then decline to 2.8 percent in 2026. It is expected to recover to 3.1 percent in 2027.
According to the OECD, although the global economy appeared somewhat stronger at the beginning of 2026 than expected, ongoing tensions in the Middle East are negatively affecting energy markets, supply chains, investment environments, and international trade. This has created further uncertainty for global economic stability, the report stated.
The organisation also presented two possible scenarios. In the first scenario, tensions in the Middle East are brought under control in the short term and energy and supply systems return to normal. In such a case, the impact on the global economy would remain limited.
In the second scenario, however, the conflict is expected to continue for a long period, with ongoing fluctuations in energy prices and sustained disruptions in supply chains. OECD warns that such a situation could have long-term negative effects on global trade and economic growth.
The report also expressed expectations that possible diplomatic progress between the United States and Iran, along with peace efforts, could gradually reduce tensions in the Middle East. It further noted that if energy prices begin to gradually decline from mid-2026, the global economy could gain relief, and economic activity may regain momentum by 2027.
Nepalpurbadhar
