Kan Proposes $25 Billion Earthquake Budget That May Pave Way for His Exit
Japanese Prime Minister Naoto Kan
Kiyoshi Ota/Bloomberg
Naoto Kan, Japan's prime minister.
Naoto Kan, Japan's prime minister. Photographer: Kiyoshi Ota/Bloomberg
July 5 (Bloomberg) -- Jesper Koll, head of equity research at JPMorgan Chase & Co. in Tokyo, talks about Japan's economy and financial markets. Koll also discusses the resignation of Japan's disaster reconstruction minister and its implications for embattled Prime Minister Naoto Kan's administration. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
Japanese Prime Minister Naoto Kan proposed a 2-trillion yen ($25 billion) extra budget, spending that would fall short of what’s needed to rebuild after a record earthquake and the worst nuclear accident in more than 20 years.
The spending plan, to be submitted to parliament, is half the size of outlays allocated in May. The government won’t rely on new bond sales to fund the package because it will use leftover funds from last year’s budget, according to a statement released in Tokyo today.
Kan scaled back the size of the package because of rising calls from ruling and opposition lawmakers for him to step down. With government estimates putting damage from the March 11 temblor at 16.9 trillion yen, analysts are focused on subsequent budgets and how those spending plans may exacerbate the nation’s debt burden, already the world’s largest.
“The political outlook is increasingly uncertain,” said Chotaro Morita, chief strategist at Barclays Capital Japan Ltd. in Tokyo. “We don’t know how and when someone will replace Kan and when the third extra budget can be passed.”
The second supplementary budget allocates 275 billion yen for nuclear-related issues including financial support to Tokyo Electric Power Co. and radiation monitoring for Fukushima residents for 30 years. Some 800 billion yen will be set aside for reconstruction and 546 billion yen will be distributed to local governments in stricken areas.
Kan has said he also wants to win approval for bond sales and a law to promote renewable energy, before quitting. Some seventy-two percent of people surveyed said he should resign by the end of August, a Yomiuri Newspaper poll showed.
The premier will seek approval for the budget before the diet session is scheduled to finish at the end of August. He won’t be able to use the entire 1.45 trillion yen leftover funds from last year’s budget unless it is authorized by parliament.
The economy has already shown signs of emerging from a slowdown after the quake, with industrial production surging the most in more than 50 years and companies saying last week they expect profits to recover in the second half of the year.
To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
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