Finance Minister Jun Azumi said Tuesday that the Finance Ministry will defer a planned ¥4.1 trillion payment of tax grants to regional governments because the political impasse over a bond issuance bill has forced the central government to curb spending to avoid a funds shortage.
The Bank of Japan meanwhile injected ¥1.9 trillion into financial markets to prevent regional and other financial institutions from facing funding difficulties following the deferral of the grants payments that were scheduled for Tuesday.
Azumi said he will postpone the handout of the funds “for the moment,” adding that the details of how to address the matter will be decided at a Cabinet meeting Friday.
A total of ¥4.1 trillion in tax revenues was initially expected to be allocated this month, but the government is making arrangements to pay ¥2.7 trillion by the end of September and the remaining portion in October or later.
The government announced extraordinary measures last Friday to deal with its funding difficulties caused by the political deadlock blocking the bill’s enactment.
It is the first time the government has resorted to full-fledged cost-cutting of the budget during its execution, creating an abnormal fiscal situation.
Regional banks manage their cash flows based on the assumption that the central government will transfer tens of billions of yen to the saving accounts of local governments.
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