UPDATE 1-Japan MOF’s Noda denies extra budget

(For more stories on the Japanese economy, click [ID:nECONJP])

* Govt has 2 trln yen reserves for 2010/11

* Public worried about deficit -analyst
(Adds details, background, byline)

By Rie Ishiguro

TOKYO, April 5 (BestGrowthStock) – Japan’s government will use budget
reserves to support the economy rather than compiling an extra
budget, deputy finance minister Yoshihiko Noda said on Monday.

“The government is ready to respond flexibly if the economy
shows some changes,” Noda told a news conference.

He stressed that the government has budget reserves worth
about 1 trillion yen ($10.60 billion) available for fiscal
2010/11, which started on April 1, and further reserves of the
same amount for use in case of emergency.

“The government will use the reserves first,” he said, adding
that there had been no discussion of a supplementary budget for
fiscal year.

By tapping the reserves, the Democratic Party-led government
would avoid the need to issue new bonds on top of a record 44.3
trillion yen ($469.4 billion) in annual issuance already in the
budget.

“The DPJ is worried about the election as polls show their
popularity is declining,” said Satoru Ogasawara, an economist at
Credit Suisse in Tokyo.

Media polls show the Democratic Party of Japan’s lead over
the opposition Liberal Democratic Party is narrowing ahead of an
election expected in July for parliament’s upper house.

The Democrats need to win an outright majority in the upper
house to avoid relying on two small coalition parties.

“At this moment, they may not need to spend more money. Many
people are also concerned about the budget deficit, so spending
the reserves may not necessarily earn them votes,” Ogasawara
said.

Credit rating agencies have threatened to downgrade Japan’s
sovereign rating as the government’s ambitious spending plans
have fuelled concerns that Japan’s debt burden will continue to
grow.

Japan’s public debt is about twice the size of the economy.
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($1=94.38 Yen)
(Editing by Michael Watson)

UPDATE 1-Japan MOF’s Noda denies extra budget