The administration plans to craft an extra budget worth more than ¥3 trillion this month, without relying on new debt issuance, to help pay for reconstruction in the quake zone, a blueprint for the budget shows.
Around ¥2.5 trillion in the first supplementary budget for fiscal 2011 would come from funds initially secured to enable the government to maintain its contribution to basic pensions at 50 percent, according to the blueprint.
The rest would be generated by scrapping some of the Democratic Party of Japan's key policies under the regular budget, including increasing the child allowances and removing tolls from more expressway sections.
The administration had mulled drawing up a first extra budget no bigger than ¥3 trillion, but it is now seeking to spend a little more than that mark, the blueprint shows.
Regardless, the administration will face a difficult road, partly because some DPJ lawmakers remain opposed to scrapping some of the party's major pledges.
The extra budget would mainly finance the costs of clearing rubble from the disaster and building temporary housing, restoring public facilities and infrastructure, and creating jobs.
The administration wants to submit the supplementary budget to the Diet before Golden Week starts April 29.
The emergency spending would most likely be followed by more extra budgets, and total expenditures could top ¥10 trillion, DPJ lawmakers said.
The administration hopes to formulate the second supplementary budget around June. It is widely expected that it won't be possible to fund further emergency spending without new bond issuance.
Regarding pensions and the blueprint for the first extra budget, the government would shoulder 33 percent of basic benefits in fiscal 2011.
When the Hanshin quake devastated Kobe and its vicinity in early 1995, the government immediately crafted an extra budget of ¥1.02 trillion and spent around ¥3.2 trillion in one year on reconstruction.