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The government plans to compile a supplementary budget for fiscal 2010 to address the surging yen and boost the economy together with the yearend preparation of the fiscal 2011 budget, in order to avoid new bond issuances to finance the stimulus package.

The Cabinet of Prime Minister Naoto Kan hopes to submit the supplementary budget to the ordinary Diet session soon after it convenes in January, rather than to this fall’s extraordinary session, government sources said.

The government seeks to secure several trillion yen for the extra budget without issuing additional Japanese government bonds, as it could use unused portions of the initial fiscal 2010 budget as well as tax revenues in the fiscal year through March, which may be greater than estimated in view of improving corporate earnings.

Kan is planning to announce the fresh stimulus package Friday and introduce urgent policies by tapping around ¥920 billion in reserve funds for the fiscal 2010 budget that can be mobilized without Diet deliberations — a big difference from supplementary budgets.

Uncertainty remains over whether Kan would secure support for the extra budget plan from the opposition bloc, which controls the upper house of the Diet.

In a related move, the Liberal Democratic Party, the main opposition force, on Wednesday proposed a ¥5 trillion supplementary budget for passage through the extraordinary Diet session.

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