Japan - Japan approves US$1.1 trillion budget

But PM Noda faces more hurdles in getting opposition to cooperate on other Bills

Japan's record 90.3 trillion yen (US$1.1 trillion) national budget was belatedly approved yesterday after it had been voted down by the opposition-controlled Upper House of Parliament.

The amount is the largest for an initial budget. It is common for the Japanese government to enact one or more extra budgets during the fiscal year.

If special outlays for reconstruction projects in the quake-stricken north-eastern region of Japan are added to the budget, the amount comes to 96.7 trillion yen.

As was the case last year, the budget Bill again failed to clear the Upper House.

When this happens, Japanese law provides for the budget Bill to be enacted, since it has already been approved by the more politically influential Lower House.

Because the Noda administration was unable to get the budget approved before the new fiscal year, which begins on April 1, a stop-gap budget had been in force since Sunday to ensure that the government did not run short of cash.

However, the approval of the national budget is scant consolation for Prime Minister Yoshihiko Noda, since the opposition has refused to deliberate a Bill necessary for Parliament to approve the issue of deficit-financing bonds to fund about 40 per cent of the budget.

These new bonds will add to the country's burgeoning debt, which already equals almost twice the gross domestic product.

In an attempt to get the opposition to agree to the Bill, Mr Noda told the Upper House budget committee yesterday: "At this point in time, we are not in a situation where we can get the support of the opposition. But we will work on it."

Unlike the main budget, this Bill for deficit-financing bonds and other budget-related bills does not automatically become law if it is rejected by the Upper House.

Instead, it goes back to the Lower House for a second vote and needs to be approved by a two-thirds majority, which Mr Noda's ruling Democratic Party of Japan does not have.

Mr Noda is also seeking the cooperation of the opposition for a Bill to double the sales tax to 10 per cent by 2015.

The opposition sees these Bills as a chance to force an early general election.

Mr Sadakazu Tanigaki, leader of the opposition Liberal Democratic Party, has indicated that he will lend his support only if Mr Noda agrees to call early polls to seek a public mandate on the proposed tax hike.

The current session of Parliament is expected to be extended beyond mid-June to deal with the sales tax and other Bills.

The political stakes are high for both Mr Noda and Mr Tanigaki.

If Mr Noda is unable to get his tax legislation approved and Mr Tanigaki is unable to force Mr Noda to call early elections, both men are likely to be replaced as party leaders in party elections in the latter half of this year.

One thing in Mr Noda's favour is the expected gradual recovery of the Japanese economy, as domestic demand will rise when reconstruction projects kick in.

The government has earmarked some 19 trillion yen for these projects to rebuild the areas devastated by last year's quake and tsunami disaster.

The economy will also receive a boost from a jump in exports due to the recent weakening of the Japanese yen and to rising business activity in the United States.

Yesterday, the opposition-controlled Upper House rejected a government nominee to fill a vacancy in the interest-rate setting policy board of the central bank, another reminder to Mr Noda that the country's split Parliament presents a formidable hurdle to the realisation of his political agenda.

The nominee, chief economist Ryutaro Kono of BNP Paribas' Japanese office, is seen by many opposition and even ruling party lawmakers as an opponent of aggressive monetary easing. Mr Kono is against the central bank buying up more government debt, a measure favoured by many politicians.

Kwan Weng Kin

The Straits Times

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