Japan's Cabinet on Friday approved a 12.10 trillion yen (US$157.6 billion) third supplementary budget for reconstruction work related to the March disasters and measures to deal with the nation's persistently strong currency.
The package for the year through next March includes a 2 trillion yen allocation to cover policy initiatives to ease the adverse affects the yen's appreciation is having on the economy and Finance Minister Jun Azumi said he hoped the budget, yet to pass the Diet, will be a catalyst for reconstruction and provide relief for Japan's fragile export sector.
"This budget will become a great source of energy or an engine for reconstruction," Azumi said following the Cabinet of Prime Minister Yoshihiko Noda approving the package.
Azumi added that he hoped it would pass quickly through Japan's divided Diet where the opposition-bloc hold sway in the House of Councilors and be enacted by mid-November.
Further forays by Japan into currency markets are likely to be on the cards in a bid to cool the yen's rise and the government said on Friday that it intended to augment a current facility by around 15 trillion yen to finance future interventions.
A strong yen hurts Japan's key export sector as Japanese firms reliant on profits made overseas lose competitiveness when the yen is strong versus other major currencies and firms' profits are eroded when repatriated.
The Cabinet said it expected that initiatives to deal with the yen may boost the nation's economy by around 0.5 percent as well as reinvigorate the job market. Japan's economy has been struggling to deal with the strength of its currency, which has risen 5 percent against the U.S. dollar over the past 12-months.
"I don't think that the yen trading in the 70s reflects healthy profits in the export sector," the finance minister said on Friday of the yen's rise to near post-WWII highs.
The third extra budget will be far larger than the previous two, the first of which totaled around 4 trillion yen and the second of which cane to 2 trillion yen and the Cabinet confirmed Friday that the majority of the amount would be raised by issuing reconstruction bonds to the tune of 11.5 trillion yen, made viable by capital raised from hiking tax levels and other government revenues.
The government also plans to sell-off some of its assets, the Cabinet said.
The package also includes funds earmarked specifically for companies looking to relocate to, or within Japan, as a means to stem the outflow of firms moving to cheaper havens to set up production there. In addition the government plans to procure more natural resources from overseas, the office said.
The supplementary budget along with related bills, including a controversial tax-increase bill, will be submitted to the Diet on Oct. 28.
Noda, who replaced prime minister Naoto Kan who stepped down after his bungled handling of the Fukishima nuclear crisis one month ago, has pledged to revitalize Japan's ailing economy this year and the swift and smooth passage of the latest budget will be a pivotal moment for the future of Japan's fifth premier in six years.