The Lower House on Friday approved a ¥2.53 trillion fourth supplementary budget for fiscal 2011 to finance disaster relief measures in the northeast and provide financial support for struggling local companies.
The budget’s passage was assured since the ruling Democratic Party of Japan controls the powerful lower chamber, but the major opposition parties also supported it.
The opposition-controlled Upper House will now begin deliberations on the fourth extra budget Monday, and is expected to endorse it Wednesday.
To support Tohoku companies struggling under a mountain of debt, the budget earmarks ¥500 billion in credit guarantees for a special relief program that will allow a state-backed body to purchase debt from financial institutions. Many firms in the region have had to take out fresh loans to rebuild their shattered businesses, on top of their existing debt.
The government will not issue any bonds to finance the budget, and will instead tap excess tax revenues for fiscal 2011, as well as a surplus in funds originally set aside to service existing debt. This has become possible because long-term interest rates have remained at lower-than-expected levels.
The budget will also finance measures to aid carmakers, including reintroducing the popular subsidy program for purchases of environmentally friendly vehicles for another year. Domestic automakers are feeling the strain amid the yen’s historic rise, which takes a big bite out of their overseas profits when they are repatriated.