Japan says extra budgets may top $120 billion

By Kaori Kaneko

TOKYO (Reuters) – Japan’s government may need to spend over 10 trillion yen ($120 billion) in emergency budgets for disaster relief and reconstruction, the country’s deputy finance minister, Mitsuru Sakurai, signaled on Thursday.

Sakurai also said he hoped the government could ask the public to broadly shoulder the burden for reconstruction, signaling that a tax hike may emerge as an option.

Senior ruling party lawmakers have said total spending for several extra budgets that the government is set to compile this year will be around 10 trillion yen.

Asked how the government will finance extra budgets to pay for quake-related costs, Sakurai told a news conference: “When considering the magnitude (of the damage), I don’t think it will be something like 10 trillion yen,” signaling the amount will be much higher.

“We also need to take into account the bond market,” Sakurai said, suggesting that the government would prefer not to issue too much in extra bonds to fund steps for disaster relief.

“If we can ask the public to broadly share the burden, we’d like to do so,” he said.

Sakurai’s remarks are in line with those of Prime Minister Naoto Kan, who said on Tuesday he would not rule out any source of funding for reconstruction, including a tax increase or abandoning a plan to cut corporate tax.

The government is likely to set aside 2 trillion yen for disaster relief in its first emergency budget to be submitted to parliament in April, the Nikkei newspaper said on Wednesday.

Analysts say the government will probably need two more extra budgets for reconstruction in the wake of the devastating earthquake and tsunami that hit northeast Japan on March 11.

The government is still juggling delivering aid to the worst-hit areas with a protracted battle to contain the world’s worst nuclear crisis since Chernobyl 25 years ago.

It estimated last week that damage to roads, homes, factories and other infrastructure from the magnitude 9.0 quake and deadly tsunami could top 25 trillion yen, making it the world’s costliest natural disaster. ($1 = 82.875 Japanese Yen)

(Writing by Leika Kihara; Editing by Joseph Radford)

Japan says extra budgets may top $120 billion