TOKYO Dec 25 Public works spending in a
Japanese extra budget for the current fiscal year to March is
unlikely to exceed 5 trillion yen ($59 billion), a source close
to incoming Prime Minister Shinzo Abe said on Tuesday.
Abe, who formally takes office on Wednesday following his
Liberal Democratic Party's stunning victory in a Dec. 16
election, is expected to draft the budget by mid-January with
markets looking for 10 trillion yen in new spending, part of
which would need to be covered by new borrowing.
"The extra budget will be presented to parliament towards
the end of January. We cannot find 10 trillion yen worth of
public works projects by then," the source told Reuters, adding
that the 10 trillion yen total figure was not set in stone.
"The scale will be 10 trillion yen but it will not be
limited to public works spending. The most we could manage on
public works would be 5 trillion."
The remainder could include such steps as tax breaks for
purchases of fuel-efficient cars and government funding for
basic pension payouts, he added.
The source also said he thought Abe's new government was
unlikely to have to revise a law guaranteeing the Bank of
Japan's independence, since the BOJ was likely to agree to Abe's
proposal for a 2 percent inflation target.
"I don't think it will go so far as revising the BOJ law,"
the source said. "The BOJ has compromised quite a bit ... and I
think it will adopt a 2 percent inflation target. In that case,
it will not be necessary to revise the BOJ law."
Abe on Tuesday reiterated his calls for the BOJ to conduct
drastic monetary easing to beat deflation by setting a 2 percent
inflation target but added that once he became premier, he would
leave it up to the central bank to decide on specific measures
on monetary policy.