Japan's parliament on Monday passed a $50 billion emergency budget for disaster relief after the March 11 earthquake and tsunami, a downpayment on what is set to be country's biggest public works effort in six decades. The overall cost of damage caused by the world's costliest natural disaster is estimated at $300 billion and the 4 trillion yen emergency budget will be followed by more reconstruction spending packages.
Opposition parties backed the first round of spending to finance work such as clearing rubble in the disaster-stricken northeast and building temporary houses. But reaching agreement on subsequent packages is likely to be much tougher as funding is expected to involve a mix of tax hikes as well as borrowing in the bond market, a strain for Japan which is already saddled with public debt twice the size of its $5 trillion economy.
"Our basic stance is to come up with revenue sources while broadly reviewing both revenue and spending plans," Finance Minister Yoshihiko Noda told reporters. Noda said he has not decided yet on specifics but that if the government were to issue special bonds to fund reconstruction, they should be managed separately from other debt and repaid using specific revenue sources.
The minister said he hoped to compile the second extra budget as soon as possible but did not give a specific timeframe. The ruling Democratic Party needs opposition help because it lacks a majority in the upper house, which can block bills including one needed to secure about 40 percent of the revenue to fund the main budget for this financial year.
The first extra budget does not resort to fresh bond issuance. But unpopular Prime Minister Naoto Kan, who has come under fire for his handling of the crisis, has said Japan may have to issue fresh government bonds to fund further supplementary budgets. Growing calls for Kan to resign, from within and outside his party, will make it hard for him to garner enough support to pass a second extra budget.
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