Extra budget to top 2.7 trillion yen to cope with rising yen+

TOKYO, Nov. 30 Kyodo -
The second extra budget for fiscal 2009 will likely be bigger than the
initially planned 2.7 trillion yen to meet an increasing need to cushion the
adverse impact of the rising yen and falling Japanese stock prices on the
flagging economy, Deputy Prime Minister Naoto Kan said Monday.
In terms of value, the second extra budget for the year through March 31 will
likely be around 10 trillion yen as the industry ministry is planning to
enlarge the scope of corporate financing measures.
But the government has yet to decide the size of actual fiscal spending for the
supplementary budget, according to Cabinet members.
Masayuki Naoshima, economy, trade and industry minister, told reporters in
Tokyo he is trying to secure about 1 trillion yen for measures to help
cash-short small and midsize firms, adding those including credit guarantees
will have a total value of about 10 trillion yen in policy effects.
Amid Japan's deteriorating fiscal position, Kan had earlier repeatedly said the
extra budget would entail about 2.7 trillion yen in fiscal spending, counting
only on the money the Cabinet has secured through its overhaul of the stimulus
measures of the former government led by the Liberal Democratic Party.
But Kan, also state minister for national strategy, told reporters on Monday
that key Cabinet members have agreed that if necessary the size of the budget
should now be bigger than the amount of money the Democratic Party of Japan-led
government has scraped together from the first extra budget.
''We'll carefully watch to what extent the situation in Dubai will affect other
parts of the world,'' Kan said, referring to the financial instability
triggered by fears of debt default in Dubai -- which last week contributed to
the yen's sharp gains versus the dollar and the euro.
Kan suggested the government will work closely with the Bank of Japan, saying,
''We'll coordinate views with relevant institutions.''
Prime Minister Yukio Hatoyama is scheduled to hold talks with BOJ Governor
Masaaki Shirakawa this week.
When the Cabinet laid out basic guidelines for the second extra budget in
mid-November, it said there will be upcoming additional measures to focus on
employment, incentives for purchases of environmentally friendly products and
financing of small and midsize firms.
The government is trying to put together a new stimulus package this week to
finalize a draft of the supplementary budget by the end of December.
Chief Cabinet Secretary Hirofumi Hirano said at a news conference on Monday
that Hatoyama and Shirakawa will discuss issues related to the health of the
Japanese economy, including whether the central bank is seeing the need for
further quantitative easing.
Finance Minister Hirohisa Fujii told reporters in Tokyo that ''it's possible''
for the budget to be bigger than 2.7 trillion yen.
But Fujii said the possible expansion would not lead to an increase in total
outlays for the so-called 15-month budget -- with the second extra budget
covering January to March and the annual budget the year starting in April.
Fujii said the government ''will front-load'' some of the resources for fiscal
2010.
Fujii said he has no plans to issue additional government bonds to cover the
necessary costs of the extra budget.
''As to a source of funding, the bottom line is, we will do within the scope of
not damaging the nation's fiscal health,'' he told reporters later in the day
at the premier's office after attending a meeting to discuss budgetary matters
with Hatoyama and other Cabinet members.
Amid a shortfall in tax revenue, Fujii signaled that the government is
considering using non-tax receipts, such as special account reserves, to
finance the increasing spending of the extra budget.
The remarks by the ministers came a day after Hatoyama ordered key Cabinet
members to consider extra steps to cope with effects stemming from the yen's
recent sharp appreciation and the stock market slump.
The DPJ's junior coalition partners -- the Social Democratic Party and the
People's New Party -- had been calling for the size of the extra budget to be
far bigger than 2.7 trillion yen even before the yen rose briefly to levels
against the dollar unseen in 14 years last week.
==Kyodo
2009-11-30 23:02:55