[Provisional translation]
[Opening Statement by Prime Minister Takaichi]
Thank you all for attending. First of all, with regard to the situation in the Middle East, my administration will further bolster the Government's efforts to ensure that the situation there does not deal a blow to the lives, livelihoods, or economic activities of the Japanese people. Our work has been grounded in part in the recommendations submitted to us last month -- in April -- by the Liberal Democratic Party (LDP) and the Japan Innovation Party (JIP).
To start, while we see a low likelihood of electricity or natural gas fees immediately rising markedly this month or next month, we do expect the increase in the price of fuel imports to be reflected in electric bills after that. To address this situation, we will implement assistance with electricity and natural gas charges during the period from July to September, when usage increases.
Taking household electric bills as an example, we will provide assistance at the rate of 3.5 yen/kWh in July, 4.5 yen/kWh in August, and 3.5 yen/kWh in September. This will result in electricity charges for the summer of 2026 that are lower than the charges during those same months last year, even though last year's rates for that period were also subsidized. The average household will realize a reduced cost burden of roughly 5,000 yen over those three months.
This will require approximately 500 billion yen to carry out. At tomorrow's cabinet meeting we will approve the use of the general reserve fund.
Also, the situation in the Middle East remains uncertain. Accordingly, we will not limit our efforts to this assistance for electricity and natural gas charges, and instead take necessary measures as the situation demands. With that goal in mind, from the perspective of minimizing risk, we will formulate a supplementary budget and submit it to the Diet next week, in order to make all possible preparations in financial terms. We expect the scale of the supplementary budget to be over three trillion yen.
In concrete terms, with regard to our grants to local regions for prioritized assistance, to which 2 trillion yen was allocated in the fiscal 2025 supplementary budget, we will undertake additional support measures to enable enhanced support tailored to local circumstances, including, for example, support for those using extra high voltage power service or liquefied petroleum gas (LP gas), neither of which is covered by the electric and natural gas bill assistance.
In addition, tomorrow we will replenish the general reserve fund to be allocated for implementing our electric and natural gas bill assistance, restoring the balance to 1 trillion yen.
In combination with this, to ensure we are prepared on all fronts for the future, we will also newly establish a reserve fund for responding to the situation in the Middle East and other matters. This reserve fund will be something that can be used to address the impacts arising from changes in the international situation, such as the rapid climb in the price of energy triggered by the Middle East situation.
We are currently continuing our subsidies for gasoline, diesel oil, heavy oil, kerosene, and so on through the use of fiscal 2025's reserve funds. The price of gasoline has been kept in check at a national average of 170 yen per liter, the lowest level of any G7 country, including the United States. Including the effect of abolishing the provisional tax rate on gasoline, this has pushed consumer prices for April down by about 1.1 percentage points and reduced the direct burden on Japan's household finances by about 2,600 yen per household in April.
The ruling parties have recommended that the Government continue to respond flexibly, taking into consideration the Middle East situation, price trends, and the sustainability of our assistance measures.
We will deal with the situation appropriately, taking these recommendations into account and also, when the situation requires, making use of the newly-established reserve fund for responding to the situation in the Middle East and other matters. As for revenue sources for this supplementary budget, we will issue additional deficit-financing bonds.
Meanwhile, although some 3 trillion yen worth of last year's -- that is to say, fiscal 2025's -- deficit-financing bonds are slated to be issued up until June, in light of our projected tax revenues, non-tax revenues, and unspent appropriations, we are well-positioned for that amount to not actually need to be issued.
For that reason, by making adjustments within our overall projected sovereign bond issuance amount, it will be possible not to increase the total value of bonds issued into the market. In this way, we believe it is possible to execute our plan without impacting the sovereign bond market.
Under the approach of “responsible and proactive public finances,” we will continue to realize the sustainability of our public finances and secure the confidence of the market by reducing Japan's government debt-to-GDP (gross domestic product) ratio in a stable manner while giving due consideration to daily market movements and economic indicators.
Looking at crude oil, our alternative sourcing for June that does not traverse the Strait of Hormuz was forecast to surpass 70 percent as of May 12. The share is expected to increase to roughly 80 percent. Also making use of the release of reserves already decided thus far will enable our crude oil supply to exceed the amount necessary for June.
For discussion's sake, we have also worked out a conservative scenario in which we assume alternative sourcing is sustained at around 60 percent. Even in that instance, we will be able to secure a stable supply of petroleum beyond the end of fiscal 2026 [(March 2027)] until spring 2027.
And, with regard to naphtha, procurement from sources other than the Middle East has restored supply to over 80 percent of our previous level.
Redirecting raw materials to intermediate products running low in inventory and utilizing inventories at various tiers of the supply chain has resulted in the equivalent of 1.8 months of buffer stock and we are able to continue supplying naphtha-derived petroleum products into 2027.
At the same time, inadequate communication about supply projections, orders exceeding what is justified by actual business performance, and other factors have given rise to shortages of supplies in various onsite situations. We will advance in a carefully designed way our measures to prevent bottlenecks, eliminate hoarding and withholding from the market, and make all-out efforts to avoid the kind of market disorder that occurred during the Oil Shock.
At present, the Government has mobilized even local institutions within a system having a scale of several hundred people. Through efforts to dissolve bottlenecks alongside requests to 900 groups and other organizations to engage in supplying and ordering in the usual way, we have resolved bottlenecks for 37 medical items and other goods and resolved 346 situations affecting fuel oil.
Medical gloves have been released from the Government stockpile and are now starting to arrive at medical facilities. We will also work to dissolve bottlenecks proactively, without waiting for formal requests, to assist downstream businesses such as local builders, who are presumed to often be in a weak negotiating position with their suppliers.
We will provide various forms of support to small- and medium-sized enterprises (SMEs) and small-scale businesses impacted by the situation in the Middle East. Among other initiatives, we will expand cash flow assistance provided through the Japan Finance Corporation, request the pass-through of rising costs into product prices, set up special consultation desks, and provide assistance for using employment adjustment subsidies.
Going forward, we will add to the types of industry recognized as experiencing severe business conditions and strengthen the support we provide through credit guarantees. We will also conduct targeted examinations of the impacts of the Middle East situation through a system 1,000 people strong that includes subcontracting transaction investigators and construction transaction compliance investigators -- "transaction G-men" and "construction G-men" -- and redouble our support efforts, including thoroughly enforcing companies' ability to pass higher costs along into final contract prices rather than absorb the losses.
We will also vigorously support Green Transformation (GX) as a means of comprehensively building up resilience in our energy supply and demand structure.
In addition to raising the portion of decarbonized power sources such as nuclear power and renewable energy from the current amount of about 30 percent to aim at a maximum of roughly 70 percent in fiscal year 2040, we will press forward in energy conservation and a shift to non-fossil energy, thereby reducing our dependence on fossil fuels.
Beyond that, we will avoid falling into a contractionary mindset and, through strategic investments that enhance resilience against potential crises in areas where Japan enjoys strengths such as perovskite solar cells, nuclear power, and geothermal power generation, we will not only enhance the resilience of Japan's energy supply and demand structure but also vigorously advance the overseas development of products, technologies, and infrastructure that overcome energy limitations, an issue shared in common with countries worldwide.
Japan's Growth Strategy clearly lays out a winning strategy for Japan. We will tie GX in firmly to the growth of Japan's economy. Alongside that, it is important to conserve energy so that we can continue our business activities while keeping costs in check, even against a backdrop of rapidly increasing oil prices.
We will further accelerate the greatest possible utilization of the budget prepared last year as economic countermeasures at a scale of tens of billions of yen.
As a final point, we will call on the public to conserve energy, something the Government has been doing ever since the Oil Shock as the country heads into summer and winter, when energy demand peaks annually. I will have Minister Akazawa announce the specifics of this tomorrow. I will end my opening statement here.