The Japanese government plans to dedicate up to ¥10 trillion (US$127 billion) in crisis lending to businesses to help them finance day-to-day operations and repair damage from last week’s deadly earthquake and tsunami, the Nikkei Shimbun reported yesterday.
The government can provide special financing in the form of low-interest loans or interest payment subsidies backed by public funds when a natural disaster or other event triggers major economic instability, the Nikkei said.
The newspaper, without citing any sources, said that the government was considering allocating several trillion yen and up to ¥10 trillion to the scheme. Funds needed to support the scheme would be set aside in an emergency budget.
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The government looks certain to need an extra budget to fund disaster relief and reconstruction after the triple blow of a massive magnitude 9.0 earthquake, a tsunami and a radiation leak at a crippled nuclear plant.
The authorities, struggling to contain the nuclear crisis, have yet to produce an estimate of how much government spending would be needed to help the economy get back on its feet.
Japanese Economic Minster Kaoru Yosano said in an interview earlier this week that the economic damage from the disaster would exceed ¥20 trillion, which was his estimate of the total economic impact of the 1995 earthquake in Kobe.
Yosano said government spending was likely to exceed the ¥3.3 trillion Tokyo spent after Kobe, which up to now has been considered the world’s costliest natural disaster.
On Friday, the Sankei Shimbun said that the government planned to issue more than ¥10 trillion in emergency bonds to pay for the reconstruction and that the central bank would fully underwrite the issue. However, Yosano and other government officials denied the report, saying no such plan was in place.
The Nikkei said the government was also discussing creating a recovery fund that would provide medium to long-term lending for firms directly hit by the disaster. However, setting up such a fund would require several changes to the law.
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