- Govt can cover spending cost because bond yields have fallen
- Prime Minister Abe to push G-7 nations to increase spending
Japan will compile a 778 billion yen ($7.2 billion) extra budget to aid the recovery from a series of huge quakes in southern Japan last month, according to ruling party officials with direct knowledge of the spending plan.
The government can cover the cost of the supplementary budget because interest payments on Japanese government bonds have fallen, according to the officials, who asked not to be named as the plan has yet to be be submitted to parliament. Finance Minister Taro Aso said on Monday that it would be submitted on May 13.
With the Bank of Japan’s unprecedented monetary easing having so far failed to lift the nation out of a deflationary rut, the extra budget comes as pressure rises on the government to boost spending to turn around the world’s third-largest economy. Prime Minister Shinzo Abe is set to host his counterparts from the Group of Seven later this month, where he is likely to push other leading economies to step up fiscal spending.
Further impetus for action may come before the G-7 summit, with more data showing that Japan is struggling to rebound after a contraction in the last quarter of 2015. One option for Abe is to delay a sales-tax increase scheduled for next April.
The earthquakes in Kumamoto prefecture killed 49 people, with about a dozen others dying from causes including illness. Local media have said the quakes mean that Abe is likely to rule out calling a snap lower-house election this summer to coincide with a scheduled vote in the less powerful upper chamber.
The Nikkei business daily reported Monday that the government was considering spending 1 trillion yen for quake relief.