Japan’s lower house of parliament passed legislation authorizing the sale of bonds to finance the budget that will probably be blocked by the upper house, complicating Prime Minister Yoshihiko Noda’s economic policy.
The bill authorizes the sale of 38.3 trillion yen ($488 billion) in so-called deficit-financing bonds to pay for about 40 percent of budget spending for the year that began April 1. The largest opposition party is preparing a censure motion against Noda, and its leader last week signaled his party won’t approve the bill unless the prime minister calls new elections.
Finance Minister Jun Azumi last month said the government will run out of money in October should the bill fail to pass. A repeat of last year’s political wrangling that delayed similar legislation is threatening investor faith in management of the world’s largest public debt, economist Junko Nishioka said.
“Credit-rating companies have cited Japan’s unstable politics as a major factor for a possible downgrade of the country’s sovereign debt and this is an extraordinary situation,” said Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo and a former central bank official. “Investors’ trust in Japan’s fiscal policy continues to be fragile.”
The Liberal Democratic Party and New Komeito party will submit the non-binding censure motion against Noda in the upper house at 6 p.m. today, Kyodo News reported without citing anyone. A vote could take place as early as tomorrow.
Both parties this month helped pass legislation doubling the five percent sales tax by October 2015 in return for Noda’s pledge to dissolve parliament and call elections “soon.” LDP leader Sadakazu Tanigaki told reporters Aug. 23 that “we hope parliament will be dissolved swiftly, and then after that we can discuss the handling of” the deficit financing bill.
Last year the ruling Democratic Party of Japan had difficulty pushing through a deficit-financing bond issuance bill because the opposition blocked its passage to force then-Prime Minister Naoto Kan to resign. The bill was approved on Aug. 26, the same day Kan announced his resignation. Noda succeeded Kan in September.