Japan’s parliament began talks on how to finance spending for the rest of this fiscal year after a months-long impasse that has left the government weeks away from running out of money.
“We can’t rule out the possibility of adverse economic effects,” from any further delays, Finance Minister Koriki Jojima said today in the Diet’s lower house as debate began on issuing 38.3 trillion yen ($480 billion) in debt to cover about 40 percent of spending for the year through March. Japan’s three main parties have reached an agreement to approve the bond bill in the lower house on Nov. 15, Kyodo News reported.
Prime Minister Yoshihiko Noda’s ability to spend to shore up an economy at risk of recession has been restrained by the main opposition Liberal Democratic Party’s blocking of the bond bill amid a dispute over the timing of an election. The LDP has softened its stance as regions complain of economic pain from a lack of funding and Group of 20 finance officials call for an end to the gridlock.
The ruling Democratic Party of Japan and the opposition LDP and New Komeito have agreed to pass the bill in the lower house on Nov. 15, Kyodo News reported today, without citing anyone. The legislation needs to be approved by the opposition-controlled upper house once it clears the lower chamber.
Shinzo Abe, the LDP’s leader and a former prime minister, said yesterday his party doesn’t plan to block the passage of the bill, which was originally submitted in January, Jiji Press reported.
Disruption to spending by local authorities, which account for about two-thirds of public outlays, could further drag on the economy as exports and production slide. Gross domestic product shrank an annualized 3.4 percent in the three months through September, according to the median estimate of 17 economists surveyed by Bloomberg News. The data is due Nov. 12.
Jojima said last week that the government could run out of money at the end of this month if the bill isn’t passed, while his ministry warned investors that it may have to cancel a bond auction scheduled for Dec. 4.
G-20 finance officials and central bankers said this week that the delay in funding Japan’s budget is a downside risk to global growth. Moody’s Investors Services said last week the political gridlock is negative for Japan’s sovereign debt rating.