Prime Minister Shinzo Abe's Cabinet approved Thursday a 5.5 trillion yen supplementary budget for fiscal 2013 to fund an economic stimulus package designed to minimize the potential negative impact on the economy of a planned sales tax hike next year.
Vowing to achieve fiscal rehabilitation, the government will not issue additional bonds, as the country's tax revenues this fiscal year through March are likely to be higher than its initial estimate made in January on the back of the budding economic recovery.
The Cabinet also endorsed the basic outline of the initial budget for fiscal 2014, in which it pledges to make every effort to review expenditures without exception and keep new debt issuance in the next fiscal year below that in fiscal 2013.
Abe's administration will intensively implement in early fiscal 2014 the stimulus package -- centering on promoting reconstruction work following the March 2011 quake-tsunami disaster and new infrastructure investment ahead of the 2020 Tokyo Olympics.
The package is expected to make up for an around 2 trillion yen decline in demand possibly caused by the 3-percentage-point consumption tax hike to 8 percent next April from the current 5 percent, government officials said.
Public works projects are believed to have immediate effects on the economy, but they mainly benefit big companies. To fend off criticism that Abe's Cabinet has given preferential treatment to large firms, it decided to bolster measures for households.
Under the extra budget, 3.13 trillion yen will be earmarked to accelerate post-quake reconstruction work and disaster prevention steps, including 80.5 billion yen to decontaminate areas near the crippled Fukushima Daiichi nuclear complex.
Abe's government also allocated 1.42 trillion yen to bolster industrial competitiveness and 300.5 billion yen for employment measures for women, the young and the elderly.
To prevent the sales tax hike from hurting households, 649.3 billion yen will be used for cash benefits to those on low incomes, people with children and home buyers.
The government, meanwhile, is scheduled to craft the initial budget for fiscal 2014 late this month.
With the two budgets covering financial needs for a total of 15 months, the government will take necessary steps to prop up the economy in a seamless manner, the officials said.
In compiling the fiscal 2014 budget, Abe has promised to pursue a balance between economic revitalization and fiscal consolidation.
Japan's fiscal health is the worst among major industrialized nations, with public debt at over 200 percent of gross domestic product.
Tokyo has internationally pledged to halve the ratio of the primary balance deficit to GDP by fiscal 2015 from the fiscal 2010 level and turn the balance into a surplus by fiscal 2020. A deficit in the balance means the country cannot finance government spending other than debt-servicing costs without issuing new bonds.
Abe's government has planned 42.8 trillion yen in new bond issuance in fiscal 2013.