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¥5.5 trillion extra budget aims to offset tax hike

JIJI

The Abe administration has compiled an extra budget worth ¥5.47 trillion to finance economic measures designed to offset the adverse effects of the consumption tax hike in April, according to sources.

The supplementary budget for the fiscal year through next March, to be endorsed by the Cabinet on Thursday, includes spending for transportation infrastructure ahead of the 2020 Tokyo Olympics.

The stimulus package is aimed at alleviating an expected economic slowdown in April-June and ensuring growth.

Total fiscal expenditures in the package come to ¥5.5 trillion, the sources said.

The budget earmarks ¥1.4 trillion for measures to reinforce industrial competitiveness, such as Olympics-related road construction and subsidies for small and midsize firms.

Some ¥300.5 billion is earmarked for measures for women, young people, the elderly and the disabled, including support for child-raising, and ¥1.2 trillion is appropriated for accelerating anti-disaster and safety measures.

To cushion the impact of the consumption tax hike on families, the budget allocates ¥649.3 billion for cash benefits to low-income earners and households with children.

The budget sets aside ¥363.6 billion as financial contributions to the United Nations and other items.

Some ¥1.93 trillion would be transferred to the special account for reconstruction from the March 2011 disasters, which will face a shortfall due to the end of a special corporate tax surcharge a year earlier than scheduled.

The supplementary budget does not call for additional issuance of Japanese government bonds because improved corporate earnings led to a tax revenue surplus of ¥2.26 trillion.

Nontax revenues such as proceeds from the sale of shares of Japan Airlines, which was relisted, will also be used, together with a surplus from fiscal 2012.

Cutback in JGBs

The government will reduce by some ¥1.2 trillion the issuance of deficit-covering bonds in fiscal 2013, down from ¥37.76 trillion set in the initial budget, according to sources.

By reducing the amount of deficit-financing bonds for covering revenue shortfalls, the government will strive for fiscal discipline, the sources said.

It is possible to reduce such bonds for the year because public works projects worth ¥1.2 trillion in an economic stimulus package adopted Dec. 5 increase the issuance of construction bonds, the sources said.