Provisional tax abolition might raise gasoil prices
For 2026, players are paying attention to the market after the provisional tax on gasoline and gasoil are abolished in Japan. As the provisional tax on gasoline was abolished on Dec 31, 2025, market players are shifting their attention to the provisional tax on gasoil, which would be abolished on Apr 1, 2026. The abolition of the provisional tax on gasoil might raise prices.
The Japanese government would terminate the subsidy for fuels upon the abolition of the provisional tax. The subsidy has been provided to players including oil refiners to deal with high prices since January 2022. The government said that even if the subsidy was terminated, retail prices for gasoline and gasoil would virtually not change as the provisional tax would be abolished. However, this might have some impact on prices, since the abolition of the provisional tax on gasoil also has possibility to raise sale costs of retailers.

A gasoil delivery tax of JPY 32.1 per liter is imposed when gasoil is sold to end-users including transport companies. Of the gasoil delivery tax, the provisional tax portion at JPY 17.1 would be abolished and only its statutory tax portion of JPY 15 would be imposed in April onward. But when the total tax is reduced, a tax refund from municipalities would decrease as well. The decrease in the tax refund virtually means a rise in sales costs. Retailers need to raise sales prices to maintain profitability after the tax refund is reduced. Thus, gasoil prices including the gasoil delivery tax might rise by about JPY 0.5 theoretically from before the abolition of the provisional tax.

The gasoil delivery tax is exempted exclusively for the use of fishing and construction. Among some market players, prices for such "tax-exempt gasoil" are estimated to rise by JPY 17.1 from before the abolition of the revisional tax. The tax-exempt gasoil is not taxable for the gasoil delivery tax purposes as mentioned above. So, the abolition of the provisional tax would not result in a decline in tax. On the other hand, if the fuel subsidy for gasoil is abolished, prices for gasoil before tax would rise by JPY 17.1, which means prices for the tax-exempt gasoil would increase by JPY 17.1.

On the assumption that gasoil prices before tax would be raised by the termination of the fuel subsidy upon the abolition of the provisional tax, demand from wholesalers for stockbuild are expected in March just before the abolition. If such demand emerges, trade for gasoil among wholesalers might become active in March and inactive in April.

For gasoline, a provisional tax was abolished on Dec 31, 2025, prior to gasoil and a fuel subsidy of up to JPY 25.1 was added by Dec 11. The additional subsidy is at the same level as the provisional tax. According to the Agency for Natural Resources and Energy of Japan, pump prices as of Dec 3 declined by JPY 10.1 from September. The pump prices were forecast to reflect the termination of the fuel subsidy by the end of 2025. Thus, many market players predict that the termination would have a limited impact on the prices after 2026 starts.

As the provisional tax is abolished and the fuel subsidy, which has been provided for around four years, is terminated, the market would be directly affected by moves of crude oil prices in April onward. Since the market might frequently move, market players have started collecting market information more actively.

Futures market would revive?
Market players have more interest in the futures market, whose functions were paralyzed due to an introduction of the subsidy. While the futures market of the Tokyo Commodity Exchange was not subject to the subsidy, a rise in retail and wholesale prices was curbed by the subsidy. Therefore, the futures market did not work to hedge. Further, tank play, trade by using both the physical and futures market, was reduced, although traders and major dealers had actively conducted.

Since trade volumes plunged and liquidity declined in the futures market, barge gasoline and kerosene virtually moved to index trade. Only the Chukyo Lorry market has some liquidity and trading takes place just before expiration. As the subsidy would be terminated upon the abolition of the provisional tax, several market players are hoping for the recovery of the futures market.