* Quake-related spending Y9.1 trln, including over Y1 trln
* To issue reconstruction bonds over 5 yrs, redeem by
* Y9.2 trln tax hikes, Y7 trln non-tax revenue eyed over 10
* Govt willing to modify plans to get wary opposition's
By Tetsushi Kajimoto
TOKYO, Oct 7 Japan's government approved on
Friday the outline of a $156 billion extra budget and a plan to
raise taxes from next April to fund rebuilding from the March
earthquake, both of which will require opposition backing to
pass through a split parliament.
The ruling Democratic Party has begun talks with
combative opposition parties that control the upper
house to secure their support, aiming to submit bills later this
month, but it could struggle to get support for key revenue
The 12 trillion yen ($156.45 billion) budget earmarks 9.1
trillion for disaster-related spending, including 6.1 trillion
yen for reconstruction projects and more than 1 trillion yen for
subsidies and other measures to help industry cope with the
"We will continue discussions with ruling and opposition
parties, and as a result, we could modify bills and take
additional budgetary steps as needed," Finance Minister Jun
Azumi told a news conference.
With a public debt twice the size of Japan's $5
trillion economy, the government faces a delicate balancing act
to pay for its biggest reconstruction effort since the years
after World War Two without choking off a fragile economic
Many in the ruling Democratic Ruling are keen to minimise
tax hikes by squeezing as much revenue as possible from other
sources, including selling government shares in Japan Post,
which operates the postal system and Japan's biggest savings
institution, and in the state-run tobacco monopoly.
But those share sales would require passing legislation that
faces huge political hurdles, including likely stiff objections
from the Liberal Democrats, the largest opposition party.
But Azumi reiterated the ruling party's eagerness to cash in
on the government's Japan Post holdings to raise funds.
"If the Japan Post bills pass the parliament, which would
enable us to sell two-thirds of the shares, we would be able to
secure enough funds as we try to avoid a further (tax) burden,"
Tokyo plans total spending of 19 trillion yen over the next
five years to rebuild the northeast coastal areas devastated by
the March 11 disaster, including 6 trillion yen already passed
by parliament in two extra budgets for the fiscal year to next
The bulk of the third extra budget would be funded by
reconstruction bonds worth 11.4 trillion yen, which under the
government plan would be issued over a five-year period and
redeemed by the fiscal year to March 2023.
Plans also call for 9.2 trillion yen in tax hikes over a
10-year period, with the proceeds to be used to redeem the
To limit the tax burden, the government aims for non-tax
revenue or revenue savings of 7 trillion yen over the 10-year
period, in large part through spending cuts and sales of
government shares in Japan Tobacco Inc and
A Japan Post sale would allow it to top up the non-tax
portion and further hold down unpopular tax hikes.
But the opposition Liberal Democrats' commitment to a Japan
Post reform law passed when they were in power, as well as their
ties to the tobacco industry, are among the formidable obstacles
to legislative changes needed for those share sales.
Some government officials have also said it would be hard to
sell all the government's holdings in energy-related firms,
including Inpex Corp and Japan Petroleum Exploration Co
(Japex) , due to concerns about energy security.
The government's plans include a corporate tax hike for
three years from next April, as well as a 10-year hike in the
tobacco tax from October 2012 and in the personal income tax
from January 2013.