Japanese Prime Minister Yoshihiko Noda’s Cabinet yesterday approved a ￥12.1 trillion (US$158 billion) extra budget to help fund the reconstruction of Japan’s tsunami-battered northeast.
The supplementary budget for the year through March also earmarks about ￥2 trillion in measures aimed at easing pressure from the yen’s recent surge, which erodes exporters’ earnings.
“This [budget] will become a great source of energy or an engine for reconstruction,” Japanese Minister of Finance Jun Azumi told reporters after the Cabinet approval, according to Kyodo News agency.
Currency levels have exacerbated Japan’s woes lately, with Noda openly worrying it could lead to a hollowing out of Japanese industry. Major manufacturers including Panasonic Corp and Nissan Motor Co have already announced plans to shift some production overseas to protect themselves from foreign exchange risks.
The government hopes the new measures will prevent a broader exodus. It is also encouraging companies to embrace the advantages of a stronger yen by offering support to acquire companies and natural resources outside of Japan.
The package ranks second in size to the biggest-ever supplementary budget crafted in the wake of the Lehman Brothers collapse. It follows earlier extra budgets this year of ￥4 trillion and ￥2 trillion.
The latest budget includes ￥1.47 trillion for public works projects, ￥671.6 billion for small and medium-size businesses affected by the disaster and ￥355.8 billion for cleanup and other costs related to the Fukushima Dai-ichi nuclear power plant accident.
The government plans to fund the budget through spending cuts, sales of public assets, tax hikes and use of non-tax revenues as well as bond issuance.
However, the series of extra budgets will exacerbate the nation’s already dismal fiscal condition, with the overall budget swelling to a record ￥106.4 trillion.
The budget bill is subject to approval in parliament.
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