Japan to raise gasoline subsidy again, hitting cap -source

TOKYO (Reuters) - Japan is expected to hike its gasoline subsidy for oil distributors to 5 yen ($0.04) a litre for the week starting on Thursday, a government source told Reuters, hitting a cap for the temporary scheme to blunt a sharp rise in fuel prices.

Fuel prices have surged as crude oil prices soared to seven-year highs on concerns over tight global supply and potential supply disruption amid political tension in Eastern Europe.

The increase is Japan's third consecutive weekly hike since launching the emergency programme late last month to compensate oil wholesalers for their costs, in an effort to rein in prices and eventually keep down retail rates.

The Ministry of Economy, Trade and Industry (METI) plans to announce the hike on Feb. 6, said the source, who sought anonymity on the grounds of not being authorised to speak to media.

The rare subsidies come as Japan's average retail price of gasoline hit its highest in more than 13 years last month, at 170.2 yen a litre, exceeding the ministry's 170-yen threshold to trigger the subsidy scheme.

The subsidy for the week starting on Jan. 27 was 3.4 yen per litre, rising to 3.7 yen for the following week.

The programme is funded by 89.3 billion yen ($775 million) in the initial and supplementary budgets for this fiscal year to March 31, but the fund will run out if current levels of payment continue.

Media have said the government was considering raising the cap to 15 yen per litre, but on Monday, Chief Cabinet Secretary Hirokazu Matsuno said the government was not thinking about raising the cap at the moment.

($1=115.2800 yen)

(Reporting by Ritsuko Shimizu; Writing by Yuka Obayashi; Editing by Clarence Fernandez)

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