Japan mulls 4th extra budget of 1-2 trillion yen: report - Reuters

 

Japanese Prime Minister Yoshihiko Noda arrives for an opening ceremony of the extraordinary session of parliament in Tokyo September 13, 2011.

Credit: Reuters/Yuriko Nakao

TOKYO | Tue Sep 13, 2011 9:24pm EDT

TOKYO (Reuters) - The Japanese government is considering compiling a fourth extra budget for the fiscal year to March of about 1 to 2 trillion yen ($13-26 billion) to fund additional economic steps without issuing new bonds, the Yomiuri newspaper reported on Wednesday.

The extra budget, which Prime Minister Yoshihiko Noda's government may start compiling as early as November, could provide funding for economic measures as concerns grow over a global economic slowdown and the euro zone debt crisis, the Yomiuri said without citing sources.

The budget, which may also include funding for rebuilding following a recent storm that hit western Japan, will be funded from extra money that was set aside for bond interest payments that turned out to be lower than expected, the Yomiuri said.

The government is currently working on a third extra budget, expected to be more than 10 trillion yen in size. It aims to submit a bill on this to the country's divided parliament in October.

Money from that budget will be used to fund projects to rebuild areas destroyed by a huge earthquake and tsunami in March and also include steps to combat the strong yen, which is clouding the outlook for Japan's export-oriented economy.

How to secure reconstruction funding is still under debate in Japan, saddled with a public debt twice the size of its $5 trillion economy.

Noda has said he first wants to cut wasteful spending and carry out expenditure and revenue reforms then hike taxes, but opinions vary in his ruling party. A government tax panel headed by Finance Minister Jun Azumi is planning to present various options soon.

The panel plans to drop the corporate tax rate by 5 percentage points to meet a ruling party pledge, before raising that tax by 4 percentage points for a limited period of three years to fund rebuilding, the Asahi newspaper reported.

The rest will be filled in by raising other taxes, mainly income tax, and the hike period will be for five to 15 years, the Asahi reported, without citing sources.

($1 = 76.880 Japanese Yen)

(Reporting by Yoko Kubota; Editing by Edwina Gibbs and Joseph Radford)

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Japan mulls 4th extra budget of 1-2 trillion yen: report (Reuters)

TOKYO (Reuters) – The Japanese government is considering compiling a fourth extra budget for the fiscal year to March of about 1 to 2 trillion yen ($13-26 billion) to fund additional economic steps without issuing new bonds, the Yomiuri newspaper reported on Wednesday.

The extra budget, which Prime Minister Yoshihiko Noda's government may start compiling as early as November, could provide funding for economic measures as concerns grow over a global economic slowdown and the euro zone debt crisis, the Yomiuri said without citing sources.

The budget, which may also include funding for rebuilding following a recent storm that hit western Japan, will be funded from extra money that was set aside for bond interest payments that turned out to be lower than expected, the Yomiuri said.

The government is currently working on a third extra budget, expected to be more than 10 trillion yen in size. It aims to submit a bill on this to the country's divided parliament in October.

Money from that budget will be used to fund projects to rebuild areas destroyed by a huge earthquake and tsunami in March and also include steps to combat the strong yen, which is clouding the outlook for Japan's export-oriented economy.

How to secure reconstruction funding is still under debate in Japan, saddled with a public debt twice the size of its $5 trillion economy.

Noda has said he first wants to cut wasteful spending and carry out expenditure and revenue reforms then hike taxes, but opinions vary in his ruling party. A government tax panel headed by Finance Minister Jun Azumi is planning to present various options soon.

The panel plans to drop the corporate tax rate by 5 percentage points to meet a ruling party pledge, before raising that tax by 4 percentage points for a limited period of three years to fund rebuilding, the Asahi newspaper reported.

The rest will be filled in by raising other taxes, mainly income tax, and the hike period will be for five to 15 years, the Asahi reported, without citing sources.

($1 = 76.880 Japanese Yen)

(Reporting by Yoko Kubota; Editing by Edwina Gibbs and Joseph Radford)

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Budget request deadline delayed

The Cabinet approved plans Tuesday to delay the deadline for funds requests made by ministries for the fiscal 2012 budget by a month, citing work on the third supplementary budget and Prime Minister Naoto Kan's imminent resignation.

My point of view: Finance Minister Yoshihiko Noda speaks to reporters in the Diet on Tuesday. KYODO

Kan officially announced his intention to resign next week.

Finance Minister Yoshihiko Noda also asked ministries for a 10 percent cut in so-called policy spending for the next fiscal year's budget so funds can be earmarked for social security costs.

Government agencies and ministries are asked to submit their funding requests to the Finance Ministry by the end of August, but this year the closing date will be Sept. 30, Noda said.

"We are at a transition stage from the current Cabinet to the new Cabinet," said Noda, himself a candidate in the Democratic Party of Japan presidential race to find a successor to Kan. The next DPJ leader will likely be elected Monday.

Noda added that the supplementary budget, which will include major allocations for restoring the disaster-hit Tohoku region, cannot be put aside.

According to an outline released Tuesday by the Finance Ministry, general account spending for fiscal 2012 will be kept at less than ¥71 trillion, or at the same level as the fiscal 2011 budget. Spending related to Tohoku's reconstruction and subsidies for hepatitis B patients will be handled separately from the general account.

Issuance of new bonds will be limited to ¥44 trillion, the same as this year, the ministry said.

The government will "make necessary cuts and create a budget that puts priority on urgently needed policies," Noda told reporters, adding that despite the delay for allocation requests, the Cabinet intends to approve the final budget plan by the end of December.

As a preliminary guideline for making requests, the Finance Ministry put out a principle for the budget plan that calls for a 10 percent policy spending cut that is to pay for an extra ¥1.2 trillion in additional social security costs in 2012. Policy spending does not include necessary outlays such as employment costs.

A part of the 10 percent cut will also be set aside for projects prioritized by the next prime minister, according to the Finance Ministry.

Some budget items are excluded from the list of spending cuts. They include money the central government pays local governments, social security costs such as medicine and pensions, subsidies for farmers and money to cover public high school tuitions that students will stop paying in the next school year.

Tuesday's proposal by the ministry is in line with the midterm fiscal policy plan released by the government earlier this month that calls for turning around the combined primary budget balance by 2020.

KYODO

Finance Minister Yoshihiko Noda said Tuesday the government could use its contingency funds to finance rescue measures for industries coming under pressure from the rising yen.

Noda said the government is keeping a close eye on speculative moves in the currency market to prevent any excess volatility in the value of the yen.

"I think it is possible to consider" using government contingency funds, he told reporters, referring to possible measures to ease the negative impact on Japanese industries from the yen's advance against the dollar and other major currencies.

The comment added to the view held by some other ruling party lawmakers that the government should respond swiftly by using reserve funds to defuse tension over expectations that Japanese manufacturers will accelerate their relocation of production abroad to cut costs.

Utilizing the funds is an option that could be implemented faster than other steps, including forming an extra budget.

Noda earlier said the government could give incentives to domestic manufacturers to remain in Japan by using a slice of funds under an envisaged third supplementary budget for fiscal 2011, which will mainly be aimed at financing reconstruction work following the March 11 earthquake and tsunami.

"There is no doubt that the excess strength of the yen will have a negative impact on the Japanese economy at a time when we are making every effort" to rebuild disaster-hit areas, he said. "Now we are closely watching whether there are any speculative moves" in the market.

KYODO

Finance Minister Yoshihiko Noda on Tuesday criticized recent remarks by one of the top bureaucrats in his ministry that were taken by the currency market as suggesting Japan is not eager to intervene and weaken the yen.

"Under these circumstances in which many (market players) are paying particular attention, such a key person should be careful about his remarks," Noda told a Diet committee, referring to Vice Finance Minister for International Affairs Takehiko Nakao.

Nakao, Japan's top financial diplomat who took office earlier this month, said in an interview with The Wall Street Journal on Friday that the Finance Ministry and the Bank of Japan "don't have plans to intervene often," adding, "we don't use intervention as a daily tool."

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Ten ways to reduce America's budget deficit

WASHINGTON — It's true: Deficit reduction isn't an economic panacea. It won't instantly boost the economy or the stock market. It won't automatically end financial turmoil. But none of this means that we should ignore deficits. Allowing the government's debt to spiral upward tempts a full-blown future financial crisis.

The recent White House-congressional debt deal created a 12-member congressional super-committee charged with finding $1.5 trillion of savings over a decade. This compares with some projections of cumulative deficits of $10 trillion or more through 2021. Let's engage in a fantasy. Suppose the committee doesn't deadlock and decides to find a bigger solution. What to do?

Here's a 10-step program to fix America's budget problem.

1. Decide to balance the budget over a decade. "Deficit reduction" isn't good enough. The case for balance (albeit at "full employment") is simple: discipline. If people want public services, they should be willing to pay for them.

2. Favor spending cuts over tax increases. Tax increases over the next 15 to 20 years could easily reach 25 percent to 50 percent to cover the costs of (a) the doubling of the 65-and-over population from 2000 to 2030; (b) spiraling health costs and (c) the continuation of other programs at recent levels of national income. These staggering tax increases are too burdensome. They might hobble the economy and would be unfair to younger workers.

3. Cut Social Security, Medicare and other retiree programs. They represent half of non-interest federal spending. Exempting them would require gutting other programs or enacting huge tax increases. We live longer; eligibility ages should be higher. Wealthier retirees can afford steeper Medicare fees and lower Social Security checks. The Census Bureau classifies about 30 percent of the 65-plus population as "high income" (incomes at least four times the poverty line). In 2008, the median net worth of married elderly couples was $385,000.

4. Don't spare current retirees or baby boomers. People don't lose the capacity — or moral obligation — to change just by turning 65. They should bear some of the burden.

5. Evaluate defense needs independently — and pay for them. National security is the government's first job. When America's military is put in harm's way, it should not become a victim of a rich nation's cheapness.

6. Eliminate outdated, ineffective and wasteful programs. Across-the-board domestic spending cuts perpetuate bad programs and penalize the good. This ensures lousy government. Subsidies for farmers, public broadcasting and Amtrak, among others, should end.

7. Lower income tax rates by reducing tax breaks — and make the system more progressive. The idea: spur economic growth. There should be three rates — 10 percent, 20 percent and 30 percent. Capital gains (profits on sales of stocks and other assets) should be taxed at ordinary income rates, not at today's top rate of 15 percent. This low rate is the biggest tax break for the rich; two-thirds of capital gains go to the wealthiest 1 percent. The overhaul should be revenue neutral; all money from ending tax breaks should go to lower rates.

8. Enact an energy or gasoline tax. Even with spending cuts, higher taxes will be needed to balance the budget. A 25-cent-a-gallon (3.8 liters) fuel tax would raise $291 billion over a decade, says the Congressional Budget Office. The actual tax might have to be $1 or more. But it would have an added benefit: curbing oil imports by spurring drivers to buy more fuel-efficient cars.

9. Control health costs. This is crucial, because health spending already represents 25 percent of federal outlays. Unfortunately, there's no consensus on how to do this. The committee should create a group of experts to prepare two plans: one favoring liberals' approach of tougher regulations; the other reflecting conservatives' preference for vouchers and tax credits. The report should be ready by late 2012 for the next president and Congress to debate and decide.

10. Make changes gradually. It's important to limit adverse effects on the economy and to win public acceptance. Increasing Social Security's eligibility age to, say, 70 could occur over 25 years. A $1-a-gallon gas tax could be introduced over six years. Axed programs could be phased out over three years.

Deficits reflect a gap between the benefits Americans expect and the taxes they're willing to pay. There's no way to close it painlessly. But we can distribute the pain in ways that seem "fair" and serve a common good. Once done, this could bolster confidence. Households and businesses would know what to expect. Now, it's unclear whose spending will be cut and whose taxes raised.

The longer we wait, the more disruptive changes will be. Despite this, we've repeatedly delayed. We now have another opportunity to break that pattern; sadly, the odds are that we won't.

© 2011 Washington Post Writers Group

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Firms team up to launch Japanese budget airline - Calgary Herald

CDMScriptManager.load("http://s9.addthis.com/js/widget.php?v=10");Agence France-Presse August 17, 2011 4:02 AM

Qantas Airways, Japan Airlines and Mitsubishi Corp. said they will launch a new budget airline, Jetstar Japan, by the end of next year, as competition heats up in the low-cost Japanese market.

The airline will be one-third owned by each company and aims to offer fares that are 40 per cent below existing domestic prices. Jetstar Japan flights are set to commence from the end of 2012, by which time Japan Airlines' rival All Nippon Airways will have two ventures up and running - Peach Aviation and AirAsia Japan with Malaysia's AirAsia.

Qantas chief executive Alan Joyce called it a "historic" step for Jetstar, which is the Australian airline's budget offshoot and also the Asia-Pacific's fastest growing carrier, carrying almost 20 million passengers a year.

"This is a major opportunity in a major market," he said, adding that Qantas had a proven ability to operate low-fare airlines.

"It is, we think, the first joint-venture partnership of its kind between an Australian company and two iconic Japanese brands."

Despite a surging yen and a recent post-earthquake slump in tourism to Japan, the domestic low-cost market is being eyed as a major growth opportunity.

Japan's high fuel taxes and landing fees have made it difficult for airlines to introduce low-cost level fares but this is changing, say analysts, amid more "open skies" deals with other nations and future increases of capacity.

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