Japan's economy and industry ministry has announced it will lower in phases the upper limit of subsidies for oil wholesalers from January through May next year.

The subsidy program is aimed at reducing the impact from surging prices of gasoline and other fuels. Since January this year, oil distributors have been receiving subsidies when the average nationwide gasoline price goes above 168 yen, or about 1.27 dollar, per liter.

The support covers up to 35 yen above the 168 yen threshold. Half the amount exceeding the 35 yen cap is also provided.

The ministry says the subsidy ceiling will be cut by 2 yen each month from next year while the base price of 168 yen will remain the same.

This means the upper limit will be 33 yen in January and down to 25 yen in May.

The system for supporting half the amount above the ceiling will be maintained.

The ministry plans to reduce the size of subsidy further from June, taking into account crude oil price changes.

The subsidy program was initially planned to be terminated at the end of March, but has since been extended repeatedly.

More than 6.2 trillion yen, or about 47 billion dollars, has been allocated as a budget through the end of September next year.

The government faces the challenge of balancing care for people's livelihoods and keeping fiscal discipline.