April 1 (Bloomberg) -- Japanese car drivers rushed to fill their tanks after the government failed to renew fuel taxes yesterday cutting gasoline prices by as much as 16 percent at some stations.

Legislators failed to extend the country's 25.1 yen-a-liter (95 cents-a-gallon) gasoline duty, which expired on March 31. A 17.1 yen-a-liter tax on diesel, used mostly by heavy-duty trucks, also lapsed.

Gas stations began slashing prices starting at midnight to lure customers who had been waiting for cheaper fuel. The missed deadline could amount to a 2.6 trillion yen ($26 billion) shortfall in government revenue.

``We've been selling three times more gas than normal this morning,'' said Masashi Mitsuya, the manager of an Esso gas station in the Ogikubo neighborhood of western Tokyo. ``We knew our rivals would cut prices, so we had no choice.''

Some stations kept prices unchanged as gasoline is taxed at the wholesale level and they would have to absorb any reduction. Customers for diesel benefited immediately as the fuel is taxed at the pump.

Nippon Oil Corp., Japan's largest refiner, trimmed the price of automotive fuel loaded at its refineries by 25.1 yen a liter starting today. Idemitsu Kosan Co., Cosmo Oil Co. and Japan Energy Corp. also lowered prices by between 21 and 23 yen a liter for supplies loaded for shipment to retailers.

`A Little Worried'

``We've heard some cars had lined up overnight waiting for prices to be cut,'' Japanese Trade Minister Akira Amari told reporters today in Tokyo. ``I'm a little worried about what would happen if the bill to restore the tax is passed.''

Prime Minister Yasuo Fukuda had sought to extend the gasoline tax for another ten years to finance road construction. The Democratic Party of Japan, which controls the upper house of parliament, wants the gasoline tax to be cut to help consumers facing higher energy and food costs. It also wants the rest of the levy to be used for general spending.

Japan's lower house can only approve a bill reinstating the tax after April 29. Consumers may oppose a resumption after a month with cheaper fuel.

``I'd been putting off filling my tank until today,'' said Chiho Araki, a 41-year-old traditional Japanese drummer as she filled her Nissan Cube. ``Gasoline has been outrageously expensive. The cheaper, the better.''

To contact the reporter on this story: Kiyori Ueno in Tokyo at kueno2@bloomberg.net

Last Updated: March 31, 2008 23:57 EDT