Japan’s Prime Minister Sanae Takaichi is facing criticism over her government’s energy policy as rising fuel costs strain the economy. In response to increased crude oil and natural gas prices driven by instability in the Middle East, Takaichi’s administration has opted to expand subsidies aimed at capping consumer energy costs, a strategy some analysts describe as short-sighted.

Japan relies heavily on imported fossil fuels, which account for approximately 80% of its energy supply. Despite recent efforts, including the largest-ever release from the country’s oil reserves, gasoline prices have continued to climb. To contain retail petrol costs at 170 yen per litre, the government is reportedly spending about 300 billion yen monthly. This sustained expenditure has prompted Takaichi to propose a supplementary budget of 3 trillion yen to cover fuel subsidies through the summer, raising concerns among fiscal watchdogs about increased government spending and downward pressure on the yen.

Critics argue that maintaining artificially low energy prices reduces incentives for consumers to conserve fuel or seek alternatives, even as the cost of acquiring oil and gas rises amid global supply disruptions. Bank of Japan Governor Kazuo Ueda recently cautioned that even temporary energy price shocks could drive persistent inflation, underlining the risks associated with this approach.

Despite being an advocate for nuclear energy, Takaichi’s government has not aggressively pursued restarting Japan’s nuclear reactors as a means to reduce dependence on volatile fossil fuel imports. Since the shutdown of all 54 reactors following the 2011 Fukushima disaster, only about half of the 33 operable reactors have resumed activity, hindered in part by ongoing safety concerns. This limited nuclear capacity has exacerbated Japan’s vulnerability to fluctuations in global energy markets.

Some experts suggest that allowing energy prices to rise could stimulate demand for alternative technologies, such as electric vehicles (EVs), where Japanese manufacturers have lagged behind Chinese competitors. Increasing EV adoption powered by nuclear-generated electricity could lessen the nation’s exposure to external fuel price shocks, enhancing energy security and supporting long-term economic stability.

Takaichi’s policy aims to shield households from inflationary pressures but has highlighted the broader challenges Japan faces in restructuring its energy landscape amid persistent global volatility.